Prices are on the rise for everything from food to housing. It is forcing many to tighten their budgets, and some prospective retirees may be reconsidering their plans.
The latest data from the U.S. Bureau of Labor Statistics show inflation accelerated in May, rising 8.6% from a year ago.
A recent study from Nationwide Retirement Institute shows more than one in 10 people near retirement age have already postponed or are considering postponing plans to retire.
“It could be that people who were looking to retire based on these factors reconsider,” said Mihaela Pintea an associate professor of economics at Florida International University.
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More people retired during the COVID-19 pandemic than expected, she said, but rising inflation, a changing stock market, and a hot housing market are creating pause for those looking to retire in the near future.
“Their concern is, if I want to downsize, I have to sell, which is a good thing, but I also have to buy, am I going to be able to buy a house for retirement,” Pintea said.
“Inflation affects everyone and unfortunately, it impacts retirees the most, because retirees are on a fixed income,” retirement planner Craig Kirsner said.
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Kirsner is the president of Stuart Estate Planning Wealth Advisors. He said it’s generally a good idea to keep contributing to your 401k, but he says those closer to retirement should start researching additional investment strategies.
“If you are within 5-10 years of retirement, look at your plan and make sure you have the right amount of risk for you,” Kirsner said.
There are assets designed to combat inflation, he said.
“There are I Bonds, they are issued by the government. Currently an I bond based on the inflation rate pays 9.6% interest guaranteed by the government in the next six months,” Kirsner said.
I bonds are backed by the U.S. government and earn monthly interest, but you can’t redeem them for at least one year. You are limited to buying $10,000 per calendar year.
People should also look at Treasury Bonds, known as TIPS, Kirsner said. The principal value of this bond rises as inflation rises.
But the decisions you make should depend heavily on how long you have before retirement.
“If you have more time before retirement, you should continue putting money in your 401k, do not stop doing that, especially if the company is giving you a match,” Kirsner said.
Before making financial decisions, it is always best to do your research and speak with a financial professional.
For those relying on social security payments for their retirement, experts say inflation may not impact them as much. This is because social security recipients would see a boost in their benefits in a cost of living adjustment based on rising prices.
