Inflation Finds its Way to Your Wallet

We feel that there’s no doubt that people have been feeling the effects of inflation on their wallets. Everything from food to gas to home repair products seems to be increasing every day. Federal Reserve Chairman, Jerome Powell, is taking inflation very seriously, raising interest rates to combat the explosion of inflation. And although the moves have made an impact, the Federal Reserve noted that inflation is stickier than it had predicted.[1]

This is all to say that inflation may be here to stay. You might be thinking, “What can I do to mitigate the effects of inflation on my wallet?” While inflation may be nearly impossible to avoid, there might be ways to minimize its effects.

What Items has Inflation Hit the Hardest?

As you may know, inflation has impacted oil and gas prices, food, rent, and travel the most. To put that in perspective, meats, poultry, fish, and eggs, saw a 14.2% increase year over year, and gas saw a 30.2% increase year over year, compounded by the Russian-Ukrainian conflict. In addition, airline fares increased 37.8% due to supply chain shortages and COVID-19 travel bans.[2] And now, inflation in rent prices is showing that people are looking for homes, pushing rents and real estate prices even higher.

These numbers may not have a great shock value now, but when your budget is covering less and less of your costs of living, the effects of inflation become all too real. Although you can’t run from inflation, isolating segments of your budget and spending less on these categories can help mitigate the costs you face. However, it’s important to understand how your income sources in retirement may be affected by inflation as well.

Inflation Hits Retirees’ Wallets and Income Streams

For working people, inflation is a question of adjusting their budget to accommodate price increases and finding income, wages, or raises in the future that match inflation. Savings don’t usually have to be withdrawn and can be invested to potentially avoid the effects of inflation. But for retirees, your savings become your income, subjecting them to the rising costs of living. This means that not only is your budget tighter now, but your income for the future may not have accounted for the rising costs of living. Couple that with a bear market, and your retirement accounts could take a large hit, further compounding the problem.

Inflationary periods are difficult for retirees to get through, but it’s not impossible. There are financial tools and investment strategies out there that can protect against inflation or other risks you may be worried about. Talking to a financial professional is your first step toward protecting your retirement.

In calm markets, it can feel easy to see your retirement accounts meet your goals. But when the water gets choppy, we believe it’s important to have a team of experts supporting you and your retirement to help you get through unexpected economic environments. Talk to us today to get started on your path to retirement.