Have you noticed that you’re paying more for certain items lately? Price hikes on many consumer goods tend to occur in the summer. Gas prices tend to spike, and that affects the cost of everything from your overall vacation budget to a simple gallon of milk. And, this year’s severe weather events have impacted farmers and triggered a shortage of many crops, so you might also notice a difference in the cost of fruits, vegetables, and other food staples.
Of course, many of these price hikes are temporary, with prices often stabilizing when a season (or particular crisis) is over. They affect your spending power in the short term, but it’s usually not enough to trigger disaster for your budget.
On the other hand, long-term rises in prices are more gradual, but will most certainly impact your budget in your later retirement years. The overall inflation rate for 2018 was measured at 2.44 percent, and it’s holding steady at 1.79 percent now. That doesn’t sound like much, but keep in mind that these days, retirement is commonly lasting twenty years or more. Your budget might not feel too squeezed by a spike in prices this summer, but what about in twenty years, when prices have nearly doubled? That is actually a realistic scenario, and a concern for those living on a fixed income.
And those numbers just cover overall inflation; basically, just an average. Rising costs in certain categories tend to impact some groups more than others. Retirees, for example, are more likely to be impacted by the cost of healthcare. And we know that healthcare is outpacing general inflation every year for the past few years.
Our point is this: If you’ve planned for retirement income that matches your expected budget after retirement, great. But you should also consider how that budget will change over the years. Will your retirement income be structured to increase slightly each year? We can show you how to do that. Call us to schedule an appointment, and we’ll review all of the different retirement planning vehicles at your disposal, including those that could provide for a gradually increasing income to compensate for inflation.