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7 ways inflation is ruining your retirement

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There you are, enjoying your retreat which unfolds when a rude and very unwelcome guest – inflation – shows up to spoil the party.

Inflation is an irritant no matter what your age, but it particularly hits retirees. Without a stable income, rising prices can quickly become an existential threat to any retiree’s financial well-being.

Here are some of the main ways inflation saps the joy of your golden years.

1. It erodes the value of your money

Senior man gesturing stop sign to protect his money
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The annual inflation rate is 9.1% from June.

How bad is that? If prices continue to rise at this rate, the purchasing power of your money will be halved in just under eight years.

The calculations make it clear why everyone in positions of power — especially members of the Federal Reserve — is so desperate to get inflation under control.

2. It makes your debt more expensive

A stressed elderly woman bends over her laptop and her desk in a home office
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The Federal Reserve is on the warpath, repeatedly raising its federal funds rate in an effort to cool the economy and stifle inflation.

But if you’re in debt, the Fed’s actions have an unpleasant side effect: every time the Fed raises the fed funds rate, your credit card interest rate is likely to go up.

That means inflation can drive your monthly credit card costs higher and higher — at least until prices are back in check and the Fed stops raising rates.

Are you having trouble taming debt? Stop by Money Talks News Solutions Center and find expert help with credit card debt.

3. It ruins your travel plans

Unhappy elderly woman who wants to travel
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As we have reported, airfare prices have skyrocketed in recent months. The cost of hotel rooms is also on the rise.

And with today’s skyrocketing gasoline prices, charging the motorhome or campervan isn’t exactly an economical travel alternative.

Your golden years are meant to be the time to see the world, but inflation can push those dreams far from your reach.

4. It pushes you to take Social Security sooner

Senior couple upset and worried about medical bills
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If you retired a few years ago – in the good old pre-inflationary era – you may have looked at your savings and concluded that you could delay taking Social Security until later, when your payment monthly would be higher.

But a prolonged episode of inflation can quickly alter this calculation. If the money starts to dry up long before it’s due, you might be forced to take Social Security early. And while it may sometimes be the best choice for people, it often isn’t.

5. It undermines the power of your pension

Pensioner counting his coins
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Some retirees purchase annuities in order to have a stable, guaranteed source of income that is sheltered from stock market fluctuations.

Annuities have their pros and cons, but one of their biggest drawbacks is that many of them don’t come with inflation protection. If inflation spikes, your pension could become far less valuable than you ever imagined.

6. It forces you to take more risks

Upset senior using laptop
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When inflation is low, you don’t have to worry that soaring prices will soon overwhelm your savings’ ability to keep up.

But when inflation is soaring, getting an interest rate of 1% — or less — on a savings account probably won’t be enough. This might require you to invest more of your money in the stock market in hopes that the returns on your investment will keep your head above water.

Few people want to take extra risks in their golden years. But in times of inflation, they might have no choice.

7. It sends you back to work

Displeased senior worker in front of a computer
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For most people, the purpose of retirement is to stop working. Yet a spike in inflation can send retirees into a panic and send them back to the job ads.

That’s not how it was supposed to be. But inflation is upending everyone’s plans, and that includes the game plan of newly created retirees — or even veterans.

Ready to bow to the inevitable? Check out “20 Great Part-Time Jobs for Retirees”.

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