As a retiree, you may tend to constantly worry about your nest egg and how to make it last. Who has the time or energy to keep fighting that feeling off? Inflation is one of the main things that can eat away at your savings, and it seems like costs are only rising. So, how can you inflation-proof your retirement?
This article will provide a few tips to get you in the game of clearing the worry. Here we will cover the bases of:
- The rising costs of a retirement lifestyle
- Tips to inflation-proof your retirement savings
- Investing in assets and mix to protect against market volatility
- Reviewing expenses and adapting
- Staying disciplined with spending
Working with advocate advisors at Global View can make a world of difference in peace of mind connected to your wealth. Release the burden and give us a call.
Retirement lifestyle costs
Did you know that the average cost of a retirement lifestyle keeps rising each year? In order to plan for retirement, keep this in mind when you’re crafting a plan that accounts for things that you may not likely plan for if going it alone. If you’re working with certified financial planners in Greenville, SC, you can lighten the load of managing what can become a very complex investment and wealth management.
People tend to underestimate the amount they will need to maintain their retirement lifestyle. They like to think their expenses will decrease when they step out of their career, and the kids are out of school, but that is not the case. Guess what replaces parking, commuting, eating, clothing, and other costs? That’s right, healthcare, travel, entertainment, and hobbies.
This makes accurate budgeting so vital when estimating your retirement lifestyle costs. You can include within this essential, discretionary, and one-time expenses.
Health care is expected to be one of your largest costs, whether you are retiring in Greenville, SC, or Scottsdale, AZ. No matter where you choose to retire in the U.S., the average 65-year-old retired couple needs around $300,000 after taxes to cover expenses. Have you planned for and saved that much to cover you?
Inflation in retirement
Higher inflation creates higher costs in your golden years, a time in which income usually declines and individuals and couples must live on a fixed income. Because inflation is the natural foe of retirees, staying aware of inflation and planning for it becomes key to financial security.
The problem intensifies the longer inflation lasts, which can be seen and felt big time at the pump and grocery store. Have you kept a keen eye on your gas receipts or possibly cut back on drive time? Sadly, some retirees’ income may not keep pace with the price increases.
According to a study from The Senior Citizens League, Social Security benefits have lost over 30% of their buying power since 2000. The Social Security Administration ups benefits annually based on the cost of living, but that adjustment was only 1.3% in 2020. According to TSCL, the cost-of-living adjustment (COLA) does not account for the rising prices geared to U.S. senior citizens—adjustments are based on the Consumer Price Index, which excludes retirees.
It pays to know that health spending tends to grow at a faster rate than general inflation. Since most retirees cannot make ends meet on Medicare and Social Security income alone — you must budget for rising prices on your own or with investment advisors in Greenville, SC.
Tips to help you inflation-proof your retirement savings
Investors nearing retirement may find it tough to balance risk, investments, and inflation.
Adjust your portfolio
Specific adjustments or rebalancing of your portfolio are needed to align with your goals, risk tolerance, time horizon, and specific situation. Advocate advisors at Global View want to ensure you have an effective mix of stocks and bonds in your portfolio and that you’re diversified in real estate investment trusts (REITs), commodities, or alternative investments.
For example, instead of a 60% stock and 40% bond portfolio percentage, people nearing retirement might want to have 50% or less in stocks, depending on their needs. If you need to swap some of your bonds, consider pass-through securities or dividend stocks as a means to live off your savings in low-yield environments. You can also allocate some of your fixed holdings to Treasury Inflation-Protected Securities (TIPS), treasury bonds that protect against inflation.
Inflation-proof your retirement by working as long as you can.
This will increase your income and help you refrain from tapping into your Social Security benefits too early. The longer you can hold out, the better. Use this calculator to find out how much your benefit will be depending on your age and your planned retirement date.
The bottom line, since you’re living off of wages and not your portfolio, your retirement savings have more time to grow. Staying disciplined within your retirement plan is where you can win big!
Budget for higher costs in retirement
Now that you are well aware of how health care costs can impact you as you age don't forget service providers for fixes on things like home repairs. These costs tend to skyrocket in high inflationary periods. Experts say you can plan for between one and four percent of your home's value for maintenance costs each year.
When the unexpected occurs, make sure you have an emergency fund to keep you out of a financial bind.
As history proves, the cost of living is only going to continue to go up. That means that if you want to be able to maintain your current standard of living in retirement, you need to take steps now to inflation-proof your retirement savings. Remember to:
- Invest in a mix of assets to protect your savings against market volatility
- Review your expenses and make changes now so you can live comfortably in retirement
- Stay disciplined with your spending and save as much as possible
- Work with a financial advisor who can help you create a diversified investment portfolio that will protect your money from the effects of inflation
- Make sure you are taking full advantage of all the tax breaks and deductions available to retirees
If you would like support from a financial firm that has the right experience and knowledge, ask us about our hassle-free process to get you on the right track. We have options for DIY investors!
At Global View, we operate as a privately owned, independent, owner/operated Registered Investment Advisory (RIA) firm, acting as your fiduciary 24/7, meaning we agree to put your interests first 100% of the time. We never take that hat off with a fee-only structure. To help you make sense of this, this is the same way you would pay your lawyer or accountant—zero commissions.
This proves that we remain completely on your side. Our team at Global View looks forward to hearing from you!
Give us a call to explore the possibilities today. You deserve a worry-free retirement.