The Silent Drain on Retirement
- Will Riggs
- Aug 17
- 2 min read
When most people think about retirement risks, they focus on market downturns or unexpected expenses. But there's a quieter threat that can be just as damaging, inflation.
Inflation doesn't make dramatic headlines. It gradually erodes your purchasing power year after year. At just 3% annual inflation, your purchasing power could be cut nearly in half over a 25-year retirement. And 3% isn't an aggressive assumption. In recent years, inflation has exceeded that level! Inflation is the silent drain on retirement.
Healthcare presents a unique challenge for retirees. Historically, healthcare costs rise 2% to 3% faster than general inflation and healthcare needs typically grow as we age. If your plan is based on today's healthcare costs, you may be underestimating what you'll actually need.
Many retirees count on Social Security's Cost-of-Living Adjustment (COLA) to offset inflation, but COLA is based on broad inflation measures. Retirees often spend more on healthcare and housing, which can rise faster than the rate used to calculate those COLA adjustments. COLA helps, but it may not fully protect you.
Fixed income sources face the same problem. A pension without a cost-of-living adjustment loses real value every year. A check that feels generous at the start of retirement may not feel substantial 10 or 15 years later.
Part of the answer is maintaining some growth in your portfolio, even after retirement begins. Becoming too conservative too soon creates the risk of failing to keep pace with rising costs. A balanced strategy should support both income needs and long-term purchasing power.
If planning for inflation in retirement concerns you, be sure to watch our comprehensive retirement planning webinar. This on-demand, no-cost, no-obligation event can help you identify the steps to prepare for your retirement journey.
Inflation is the retirement expense that never retires. Building a strategy that accounts for rising costs ensures your savings continue working for you. Plan well, live well, retire well.
Will Riggs, NSSA
Financial Advisor
This content is for informational purposes only and is not investment, legal or tax advice. Investing involves risk, including loss of principal and past performance does not guarantee future results. Strategic Wealth Partners is an SEC-registered investment adviser; registration does not imply a certain level of skill or training. Any guarantees discussed are backed solely by the issuing insurance company. For more information, including our Form ADV, please visit adviserinfo.sec.gov.
Comments