The fear of inflation is something that Americans have not always experienced. It is not something that accompanies us year after year, and many citizens are not familiar with the details of this phenomenon. Unlike the United States, in other countries where inflations are usually higher and more cruel, residents are more informed about this issue, including retirees who are aware of all the micro and macroeconomic information of their reality.
In recent years, every dollar earmarked for retirement is no longer stretched as much as it used to be. The price pressure is increasing, and it is a constant reminder of this new reality in which the United States must adjust to living with inflation. Do you remember how much gas you could buy 20 years ago with $20? Do you remember how much your first car or your first house cost you? Those figures would be incredible today with current costs.
The same goes for groceries and healthcare, where rising prices can be a matter of life and death for many.
The Impact of Inflation on Retirees and Pensioners in the USA
All inflation affects everyone, but it can be particularly devastating for those who are about to retire or are already retired. Living on a fixed income means that every increase in the cost of living feels like an even bigger blow than before, especially for those who do not depend, for example, on retirements or Social Security benefits such as SSI or SSDI.
An eye-opening report by InvestmentNews, based on a study by Northwestern Mutual, highlighted this problem. According to writer Leo Almazora, an alarming number of Americans are feeling increasingly insecure about their financial future. The relentless march of inflation continues to wreak havoc on personal finances and the economy in general.
Said analysis revealed that only 9% of Americans feel that their income is keeping up with the cost of food. This means that 91% of Americans are struggling to keep up with inflation and not lose purchasing power.
Americans’ Growing Concerns: How to Plan in an Economy with Inflation
Inflation is a critical problem for everyone, and this includes retirees as well. In fact, this is one of the most affected populations, and unfortunately, it’s time for them to learn how to deal with this new problem that plagues us. According to Tyson Thacker and Ryan Thacker, retirement advisors at BOSS Retirement Solutions in Utah, their company has been helping thousands of families plan for retirement since 2008.
Ryan Thacker notes: “Although inflation has come down a bit, it’s not going to go away. The high prices we have seen in recent years are here to stay. If your retirement plan doesn’t take inflation into account, you could find yourself in serious trouble in just a few years.”
The Thackers claim that a difficult but necessary strategy is to plan how to double your income every 20 years just to keep up with inflation. This should be a key component in your financial strategy.
Tyson Thacker emphasizes that if you’re lucky enough to have 10 or more years of retirement ahead of you, you can’t just rely on current prices. You should consider higher prices tomorrow, and the next day, and every year until you reach retirement.
Social Security and Inflation: How Does It Affect you?
The Thacker brothers say we shouldn’t rely too much on Social Security because the past few years have shown that Social Security’s cost of living adjustment, known as COLA, hasn’t effectively dealt with inflation. In fact, according to Forbes, Social Security checks have lost nearly 40% of their purchasing power over the past two decades, and there’s no reason to believe this is going to change anytime soon.
And in the future, the situation does not seem positive, at least for now: it is expected that the Social Security Trust Fund will run out of money in less than 10 years, that is, it will be exhausted by 2035 and will only be able to cover 78% of the benefits promised to people who are retired by then.
How to Protect Your Savings with a View to Retirement
So, if you’re about to retire or are already retired, what can you do to protect your savings against inflation? The Thackers recommend a diversified approach they call “layered planning.” They say that historically the stock market has generated returns that exceed inflation, but that long-term performance comes with short-term risks, like putting everything into stocks, which is risky. Other assets such as commodities and real estate can offer protection against inflation, but they also have their own challenges.
There are also more stable income opportunities for retirees, but everyone should consult with a retirement expert close to their reality and resident in their state to find out which investment projects can serve them.
Each retirement plan should be tailored to your specific timeline, risk profile, current assets and retirement goals. This is why the Thackers developed the BOSS Retirement Plan. This personalized plan addresses the critical pieces of the retirement planning puzzle, including inflation, taxes, Social Security, health care costs, income, IRAs, 401(k) plans and more.
