Your Money: Adjusting your retirement planning to combat inflation

By David Wentz Retirement planning is a crucial financial milestone in one’s life. However, it’s not just about saving a substantial nest egg; it’s also about ensuring that your savings

By David Wentz

David Wentz of Tax Favored Benefits, Inc.

Retirement planning is a crucial financial milestone in one’s life. However, it’s not just about saving a substantial nest egg; it’s also about ensuring that your savings can sustain your lifestyle throughout your retirement years. One of the key factors that can erode your retirement savings over time is inflation. Inflation is the rise in the cost of goods and services over time, which can diminish the purchasing power of your money. In this article, we will explore how you can adjust your retirement planning to account for inflation.

Understanding the Impact of Inflation on Retirement

Inflation is a silent wealth destroyer that can significantly affect your retirement funds. As prices for everyday goods and services increase, the value of your money decreases. For retirees who rely on fixed incomes, this can be particularly challenging. To put it into perspective, consider this: If the annual inflation rate is 3%, $100,000 today will have the purchasing power of only $74,409 in 10 years.

To avoid outliving your savings or experiencing a reduced quality of life in retirement, it’s essential to incorporate inflation into your retirement planning strategy.

Invest Wisely

One of the most effective ways to combat the erosive effects of inflation on your retirement savings is through smart investing. While low-risk investments like certificates of deposit (CDs) and traditional savings accounts may provide stability, they often offer low returns that may not outpace inflation. Consider a diversified investment portfolio that includes a mix of stocks, bonds, real estate, and other assets.

Stocks, in particular, have historically shown the potential for long-term growth that can help counteract inflation. However, keep in mind that stocks come with higher risk, so it’s essential to strike a balance based on your risk tolerance and retirement timeline.

Adjust Your Retirement Goals

As you plan for retirement, it’s crucial to be realistic about your financial goals and expectations. Adjusting your retirement goals to account for potential inflation can help you set more accurate savings targets. Be prepared to save more than you initially thought to maintain your desired lifestyle.

Consider Inflation-Indexed Investments

Certain investments, such as Treasury Inflation-Protected Securities (TIPS), are designed to help protect your purchasing power against inflation. TIPS are government-backed bonds that adjust with inflation, ensuring that your principal investment grows along with the cost of living.

Regularly Review and Update Your Plan

Retirement planning isn’t a one-and-done task; it’s an ongoing process. Regularly review and update your retirement plan to ensure it stays in line with your financial goals, inflation expectations, and changing circumstances. Consulting with a financial advisor can help you make informed decisions and adjustments as needed.

Delay Social Security Benefits

Delaying Social Security benefits can be a strategic move to help combat the effects of inflation on your retirement income. If you wait until full retirement age or even beyond, your monthly benefits will be higher, providing a more substantial income buffer against rising prices.

Budget for Rising Expenses

In your retirement budget, account for rising expenses due to inflation. Include estimates for healthcare costs, housing, food, and other essentials that tend to increase over time. Having a realistic budget can help you manage your finances effectively in retirement.


Inflation is an inevitable part of the economic landscape, and ignoring its impact on retirement planning can lead to financial insecurity in your later years. By taking proactive steps to adjust your retirement strategy, including smart investing, considering inflation-protected investments, and regularly updating your plan, you can safeguard your financial well-being and enjoy a comfortable retirement even in the face of rising prices. Start planning today to secure a brighter financial future tomorrow.

This Sponsored Column is by Tax Favored Benefits Inc., an Overland Park-based financial investment firm that works with clients to create custom wealth management strategies driving by your needs. Our experienced professionals provide a full suite of wealth, investment and retirement planning services to clients across the country.

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