Retirees across the country are facing a new reality: their retirement savings are not going as far as they used to. This is due to a variety of factors, but the primary one is inflation. Inflation is the general increase in prices and decrease in purchasing power of money. Over time, inflation can have a major effect on retirees' quality of life. Here's a look at how inflation affects retirees and what can be done to mitigate its effects.
The Impact of Inflation on Retirement Savings
One of the most direct ways inflation affects retirees is through the purchasing power of their retirement savings. When prices go up but incomes stay the same, retirees have less money to spend on goods and services. This can quickly lead to a decrease in standard of living. In addition, inflation also reduces the value of retirement savings over time. If a retiree has $100,000 in savings and there is 8% inflation, then after one year their purchasing power will have decreased by $8,000.
Inflation isn't just a problem for those who are currently retired; it can also have an impact on those who are close to retirement. If someone is nearing retirement and hasn't yet started saving, then they will need to start with a larger nest egg to maintain their desired standard of living in retirement. For example, if someone wanted to have an annual income of $50,000 in retirement and there was 3% inflation, they would need to have saved $1,095,000 by the time they retire rather than $1 million.
What Can Be Done About It?
There are several things that can be done to mitigate the effects of inflation on retirees' quality of life. Retirees can help ensure that they maintain their standard of living despite the effects of inflation. as it can have a major effect on retirees' quality of life. But inflation doesn't mean senior homeowners are out of options. Most senior homeowners have the ultimate inflation hedge, their home's equity. Contact us for more information and to receive a FREE Home Value Estimator and Mortgage Evaluation.
