5 Ways to Navigate Retirement During a Time of Rising Inflation

April 10, 2023

What to Do if You’re Feeling Down About Costs Being Up

It’s nearly always challenging to live on a fixed income, but it can feel downright impossible in times of rising inflation. This is particularly true for seniors who rely on Social Security for a significant percentage of their retirement income. In 2022, the Social Security COLA did not keep pace with rising inflation and, though the 2023 COLA is currently outpacing inflation, many retirees are still necessarily wary. If you’re looking for tips to gain more financial security in retirement during a time of rising inflation, we’ve got five of them for you below.

Rising Inflation Tip #1: Analyze Your Budget In-Depth

Take a moment to consider the differences between fixed and variable expenses. Fixed costs are generally consistent on a month-to-month basis and may include your mortgage or rent, utilities, insurance, phone bill, and cable or streaming app payment. On the other hand, variable expenses are those that fluctuate and may include things like your spending on groceries, dining out, hobbies, entertainment, travel, and clothing.

To create a budget, tally up your fixed and variable expenses from the previous month, and then subtract them from your monthly income. If the result is a negative number, it means you’re running a deficit – and its clearly time to make some changes. If you get a positive number, that indicates that you have a surplus, which should give you some peace of mind.

If you find yourself in the red, don’t panic. Prioritize reviewing your variable expenses to identify areas where you can cut back or reduce. If you have leftover funds, consider using them to pay off debt or create an emergency fund.

Rising Inflation Tip #2: Postpone Major Spending

It’s not uncommon to dream of traveling in retirement, but a time of rising inflation probably isn’t the best time to take an expensive trip. If you had planned to take a long vacation but haven’t yet paid for it, postponing the trip might be a wise decision. The same goes for indulgent purchases such as a new boat, new car, or a home renovation project. If making ends meet on a monthly basis is difficult, or you’re worried it might become difficult if rising inflation continues, consider utilizing these funds for day-to-day living expenses instead. Don’t give up on your retirement dreams; just consider that you might have to make some adjustments around the edges for the time being. In a few years, it’s entirely possible that you’ll be able to work some splurges back into your budget.

Rising Inflation Tip #3: Draw on Cash

For retirees who have access to cash, a period of rising inflation may be an appropriate time to utilize those funds instead of liquidating stocks or making additional withdrawals from their retirement accounts. Having ample cash reserves may eliminate the need to tap managed portfolios until inflationary pressures dissipate. When utilizing cash to cover expenses, it’s crucial to carefully monitor every expense. Stretching your dollars during a time of inflation can help you navigate this uncertain period.

Rising Inflation Tip #4: Consider Downsizing

If you’re looking to cut down on expenses in one fell swoop, downsizing to a smaller home could be a viable option. Seek out neighborhoods that cater to retirees or condo communities that are conveniently located near supermarkets and other essential services. Consider selling your current residence and any furniture that won’t fit in your new abode. You can use the profits to cover your current expenses or save it for the future, particularly if inflation continues to rise.

Rising Inflation Tip #5: Tune-In to Your Portfolio

If you’ve saved for retirement through various accounts and investments, it’s important to evaluate how your assets are diversified to help you manage risk effectively. As you begin relying on your nest egg to support your post-retirement lifestyle, the way your investments are allocated can play a significant role in your financial security.

Review your allocations, either on your own or with your investment advisor, and consider making adjustments if necessary. A properly diversified portfolio can help protect your retirement savings from the impact of changing market conditions, while also helping to ensure that you’re on track to meet your long-term financial goals, regardless of rising inflation.

In addition to diversification, other factors to consider when managing your post-retirement investments include your overall risk tolerance, risk capacity, cash flow needs, and tax implications. An investment advisor can help you evaluate your investment options and create a personalized retirement income strategy that aligns with your goals and risk tolerance. By taking a proactive approach to actively manage your nest egg, you can help ensure that you’re well-positioned to enjoy a financially secure retirement.

Navigate Rising Inflation with the Help of a Registered Investment Advisor

If you’re concerned about how rising inflation might impact your retirement savings, it’s important to take action to protect your investments. At Davidson Capital Management, we understand the challenges that retirees face in today’s economic climate, and we’re here to help. Our team of experienced registered investment advisors can assist you in evaluating your portfolio’s allocation, develop an investment strategy, and actively manage your assets to minimize the impact of inflation. Contact us today to learn more about our services and how we can help you achieve your financial goals.