Factors to Consider to Account for Inflation

Even moderate inflation could affect your quality of life during what hopefully will be a long retirement. Be sure to consider key factors as you plan your retirement finances.

The combination of an increase in longevity and the ongoing impact of inflation can have a major impact on your retirement income’s purchasing power over time. With a retirement that could last 30 years or longer, the buying power of your retirement assets may become a concern.

To counter long-term inflation risk, you might consider delaying the start of your Social Security benefits so that you will receive a higher monthly benefit amount. (Note: there is no additional benefit increase after age 70). Social Security benefits are indexed annually for inflation. Waiting a few years to start receiving your benefits could give you a higher base for inflation adjustments once you do start collecting.

Be sure to continue to review your investments. Despite a likely decline in your risk tolerance as you approach retirement, you should consider continuing to include some investments in your portfolio that have the potential to generate growth that surpasses inflation. This could help you maintain purchasing power as time passes.

Check out the tutorial, Inflations Impact on Your Retirement Income Needs, in the One Day Is Today! online toolbox, and learn more about the effect price increases can have on an individual’s annual retirement income requirement over the course of time.