Wealth of Geeks

The 2023 TIAA Institute-GFLEC Personal Finance Index reports that 25% of working adults have reduced their retirement savings this year due to the rising cost of living. Most people’s wages have not increased at the same rate as inflation. Paying today’s bills precedes retirement savings if that’s the only option. During rising prices, cutting back on retirement savings might have unintended consequences. First, if you save less, you’ll have less in retirement.

Second, because of inflation, reduced retirement savings will have a more significant impact. Private Wealth Manager Seth J. Diener of Diener Money Management notes that the erosion of savings and investments over time due to the rising cost of goods and services is a major contributor to the stress on retirement finances in an era of rising inflation, along with the reduced purchasing power of fixed retirement income and increasing healthcare costs that outpace general inflation. Maintaining a stable retirement lifestyle requires taking steps to mitigate the effects of inflation. The following can help.

Have a Plan

It is crucial to have a well-thought-out financial plan that considers the effects of inflation. According to Adam Garcia, CEO of The Stock Dork, This plan should consider the potential erosion of purchasing power over time and aim to ensure that retirement income and savings are adjusted accordingly.

This may also mean reviewing and modifying the retirement budget to account for increasing costs, prioritizing needs over wants, seeking cost-saving measures, exploring discounts or benefits available for retirees, and creating an emergency fund to handle unexpected expenses that may arise due to inflationary pressures.

In addition to creating a budget and managing investments, financial planning can help retirees identify potential areas for cost savings. “By conducting regular expense reviews,” Garcia says, “retirees can identify non-essential expenditures that can be reduced or eliminated. This disciplined approach to budgeting can free up funds that can be allocated towards higher priority expenses or savings.”

Diversifying

Investments

Allocate assets across investment vehicles such as stocks, bonds, real estate, and inflation-protected securities. Garcia notes that Diversification helps mitigate the impact of inflation on any single investment and can potentially provide higher returns to counteract rising costs. Diversification among financial instruments and asset classes generates long-term returns with low risk since the impacts of inflation vary across asset classes.