9 Ways Inflation is Hurting Your Retirement Plans

Inflation increases the cost of living for everyone, but those on a fixed income may feel it the most.

senior camping with friends
Updated May 28, 2024
Fact checked

We receive compensation from the products and services mentioned in this story, but the opinions are the author's own. Compensation may impact where offers appear. We have not included all available products or offers. Learn more about how we make money and our editorial policies.

Retiring takes a lot of financial planning. Inflation is one thing you’ll need to account for. The cost of living is constantly increasing, and it will likely cost more to live during your retirement than it does now. 

You’ll want to prepare yourself to combat grocery inflation and other price increases as a retiree.

Here are steps you can take now to help you prepare for higher prices in retirement.

Calculate how inflation will affect your expenses

Deemerwha studio/Adobe hand putting wooden cube and inflation word on coins

You can use an inflation calculator from the U.S. Bureau of Labor Statistics (BLS) to show you how inflation has affected prices over the past several years. This will give you a better idea of how the value of the American dollar changes over time. 

When using the tool, keep in mind that inflation rates may fluctuate from year to year.

Food costs increase every year

kucherav/Adobe paper bag of groceries on wooden table

Food is something you will still need while living in retirement, and you can expect to spend more on your grocery bills in the coming years.

According to the U.S. Chamber of Commerce, the cost of groceries rose 5.3% this year. While 2022 has been an unusually high period of inflation, groceries still increase at an average of 1.3% during typical years.

Housing costs increase at a faster rate

makibestphoto/Adobe businessman doing calculator finance cost in home office

Americans pay more for housing than for any other expense. During 2021 home costs increased by approximately 20% even though the inflation rate was less than 8%. 

Given that the price of housing has increased nearly 400% since 1985, you should prepare yourself for even higher costs when you retire.

Even if you plan to rent, you should expect to pay more. Rent costs also soar with inflation and are directly related to high home prices. Landlords also need to keep up with the higher living expenses and will likely pass those expenses on to tenants.

Gas prices impact other costs

manusapon/Adobe man pumping gasoline fuel in car at gas station

When gas prices rise, so do costs for many other items. 

Americans rely heavily on the transportation industry to deliver goods, such as groceries, medications, and other essential items. To offset the increased cost of delivering these products, companies raise prices.

Higher gas prices also mean spending more money to fill up your own car. The good news is you won’t have transportation costs to get to work. 

However, other transportation needs for health care, daily errands, or entertainment will increase your expenses. You can save money on gas by going out less.

Travel expenses could increase

RomanR/Adobe airplane on dollar bills

Airline prices have increased dramatically since before the COVID-19 pandemic. A major driving factor for the high prices is the cost of fuel. Other factors include labor shortages and high debts.

Travel expenses could increase further over time. This is something to take into account if you plan to visit friends or family members who don't live nearby. 

Airfare is not the only long-distance travel expense impacted by inflation. Train and bus fare rates will likely increase as well.

Plan for higher health care costs

Halfpoint/Adobe doctor explaining a senior woman how to take pills

Aging generally means you’ll have more health issues. It is not just prescription drugs and routine visits you need to plan for. Part of planning for retirement is preparing for unexpected expenses.

If you need long-term care or develop new or worsening health conditions, your health care costs will grow. 

The price of long-term care for seniors rises as facilities pay more in operating costs. And the cost of long-term care insurance increases with age too.

Adjust your investment portfolio

William W. Potter/Adobe financial investment products in a shopping cart

Having smart and long-term investments in your portfolio will help you better prepare for inflation during your retirement. 

These assets should grow in value and provide you with options for selling them at prices that reflect economic conditions at that time.

Given the accelerated rate of home price increases, real estate is one of the best long-term investments you can make. 

But there are many factors to consider, especially during times of increased inflation. Investing in rental property is another option you might consider.

Adjust your monthly budget

RomanR/Adobe team analyzes the business expenses of the annual budget

Saving more money now will give you extra cash to help cover inflation during retirement. Reassess your budget and determine where you can save. 

Although Social Security applies cost-of-living adjustments, it won't replace your pre-retirement income. It's crucial to grow your retirement savings to make up the difference.

Talk to a financial advisor

WavebreakmediaMicro/Adobe Senior couple planning their investments with financial advisor

A financial advisor can help you plan for your future. They will evaluate your income, spending habits, and goals and make suggestions based on your situation.

Some financial advisors will also help you adjust your investment portfolio. This is especially beneficial if you need help making the right long-term investments. 

Your goal is to make a return on your investments, not lose money on them.

Do you dream of retiring early? Take this quiz to see if it's possible.

Bottom line

wavebreak3/Adobe couple using calculator in kitchen

Inflation rates will impact your retirement. The cost of living increases as inflation rates rise, but there are things you can do to prepare yourself for higher prices. 

In addition to these tips, you can find ways to supplement Social Security income. This is especially important if you hope to retire early.

CloudBank 24/7 Savings Benefits

  • Incredible 5.22% APY1 to boost your savings
  • Enjoy 24/7 online access to your account and funds
  • Interest is compounded daily and posted to your account monthly
  • Powered by Raisin's intuitive savings marketplace
  • FDIC insured through Third Coast Bank SSB, no fees, $1 minimum deposit
  • Limited Time Bonus: Earn up to $2,000 when you refer friends and family to Raisin. Visit site to learn more.

Author Details

Katelyn Washington

Katelyn Washington is a writer with a passion for finance and business. She put herself through business school as a single mother of three and has had pieces commissioned by national magazines. When she’s not writing, she enjoys spending time with her family and editing manuscripts for indie authors.