Retiring takes a lot of financial planning. Inflation is something you will need to consider. The cost of living is constantly rising and it will likely cost you more to live in retirement than it does now.
You will want to prepare for fight against food inflation and other price increases as a retiree.
Here are steps you can take now to help prepare for higher retirement prices.
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1. Calculate how inflation will affect your expenses
You can use an inflation calculator from the US Bureau of Labor Statistics (BLS) to show you how inflation has affected prices over the past few years. This will give you a better idea of how the value of the US dollar has changed over time.
When using the tool, keep in mind that inflation rates can fluctuate from year to year.
2. The cost of food increases every year
Food is something you will always need in retirement, and you can expect to spend more on your grocery bills in the years to come.
According to the US Chamber of Commerce, the cost of groceries has risen 5.3% this year. While 2022 has been a time of unusually high inflation, groceries are still rising an average of 1.3% in typical years.
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3. Housing costs are rising at a faster rate
Americans pay more for housing than for any other expense. In 2021, housing costs increased by around 20% even though the inflation rate was below 8%.
Since housing prices have risen almost 400% since 1985, you should prepare for even higher costs when you retire.
Even if you plan to rent, you should expect to pay more. Rental costs also skyrocket with inflation and are directly linked to high house prices. Landlords also have to deal with higher living expenses and will likely pass these expenses on to tenants.
4. Gas prices have an impact on other costs
When gasoline prices rise, the costs of many other items also rise.
Americans rely heavily on the transportation industry to deliver goods, such as groceries, medicine, and other essentials. To compensate for the increased cost of delivering these products, companies are raising prices.
Higher gas prices also mean spending more money to fill up your own car. The good news is that you won’t have transportation costs to get to work.
However, other transportation needs for health care, daily errands, or entertainment will increase your expenses. You can save money on gas going out less.
5. Travel costs could increase
Airline prices have increased significantly since before the COVID-19 pandemic. A determinant of high prices is the cost of fuel. Other factors include labor shortages and high debts.
Travel costs could still increase over time. This is something to consider if you plan to visit friends or family members who don’t live nearby.
Airline tickets aren’t the only long-distance travel costs affected by inflation. Train and bus fares will likely increase as well.
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6. Expect higher healthcare costs
Aging generally means that you will have more health problems. It’s not just prescription medications and routine visits you need to plan for. Part of planning for retirement is preparing for unexpected expenses.
If you need long-term care or develop new or worsening health conditions, your health care costs will increase.
The price of long-term care for the elderly increases as facilities pay more in operating costs. And the cost of long-term care insurance also increases with age.
7. Adjust your investment portfolio
Having smart, long-term investments in your portfolio will help you better prepare for inflation during your retirement.
These assets should appreciate in value and provide you with options to sell them at prices that reflect current economic conditions.
Given the accelerating pace of rising house prices, real estate is one of the best long-term investments you can make.
But there are many factors to consider, especially in times of heightened inflation. Investing in a rental property is another option you might consider.
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8. Adjust your monthly budget
Saving more money now will give you extra cash to help cover inflation during retirement. Reassess your budget and figure out where you can save.
Although Social Security applies cost-of-living adjustments, it will not replace your pre-retirement income. It’s crucial to grow your retirement savings to make up the difference.
9. Talk to a financial advisor
A financial advisor can help you plan for your future. They will assess your income, spending habits, and goals and make suggestions based on your situation.
Some financial advisors will also help you adjust your investment portfolio. This is particularly beneficial if you need help making the right long-term investments.
Your goal is to make your investments profitable, not to lose money on them.
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At the end of the line
Inflation rates will impact your retirement. The cost of living rises as inflation rates rise, but there are things you can do to prepare for higher prices.
In addition to these tips, you can find ways to supplement social security income. This is especially important if you are hoping to retire early.
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This article 9 Ways Inflation Hurts Your Retirement Plans originally appeared on FinanceBuzz.