Re-estimating Retirement in an Age of Inflation
With inflation rising, it's time to take another look at your retirement plans.
Planning for retirement can feel overwhelming under normal circumstances but add in inflation—now at roughly 8%, the highest it has been since 19821—and you may feel even more uncertain about your financial future.
If so, you’re not alone. According to a recent survey, 61% of retirement-age investors believe rising inflation combined with today’s relatively low-interest rates will make it difficult for them to create a reliable income stream that will last throughout retirement.2
Some economists believe this as well, although others predict that today’s inflation is temporary and will ease as the supply chain returns to normal.
Either way, costs for everything from gas and groceries to healthcare and travel have increased, which can be especially concerning for those living on a fixed income. That’s why many individuals who had planned to retire in the near term are instead continuing to work.
Whether you’re among them or not, now’s an ideal time to ensure you have enough money to retire.
Start by asking your financial professional how today’s inflation rate could impact your long-term financial plans. He or she will likely explain that many of the traditional rules and guidelines for investing no longer apply. For example, the common 4% withdrawal rule for those willing to take a “moderate amount of risk” has been cut to 2.4%, according to Professor Wade Pfau and other retirement experts.3
If you’re wondering what’s right for you and how inflation may impact your retirement plans, visit Jackson’s Retirement Income & Expense Calculator to project your future income needs. Then meet with your financial professional to go over your income and expenses and to discuss your retirement plans. Here are some questions you may want to ask:
- Can I still retire by my goal date? If not, how long should I postpone my retirement?
- If I do postpone retirement, how much more will I receive from Social Security?
- Should I also reduce how much I spend? If so, by how much?
You may also want to ask your financial professional if, in addition to stocks and bonds, there are other investment vehicles you should consider. For instance, if you purchase an add-on benefit, annuities can help alleviate the risk of inflation by providing long-term, tax-deferred income throughout retirement...no matter how long it lasts.