Inflation: A Silent Retirement Killer

By Brent Meyer — SafeMoney.com Founder & Editor Reviewed by Licensed Financial Professionals  |  SafeMoney.com — Trusted Since 2011  |  Updated Regularly Quick Answer: Learn how inflation impacts your retirement savings and discover safe money alternatives to protect your future. Explore strategies today! Sure, many people stress over money issues . From mortgage payments and other bills to household spending and transportation costs, more than a few financial stressors are taking a toll. But retirement is quite different from the earlier stages of life. What may be Americans’ top money stressor as they venture into their retirement years? According to a recent survey by Allianz Life, a top economic worry is inflation. Nearly one-third, or 32% of Americans said that they are “panicked” or “very worried” about inflation and its effects on their retirement. It’s good that retirement investors are aware of inflation, but many underestimate it as a significant risk. In the survey, 64% said they don’t have a plan to address inflation. Among the 36% who do, 51% indicated “being more frugal with their money” would be their plan of action. And what about when it comes to actual planning? The Society of Actuaries reports that 45% of retirees and 28% of pre-retirees neglect inflation in their retirement plans. Because inflation can be a real dealbreaker for retirement lifestyle – especially as lifespans increase – here’s a look at the power-punch that inflation can land over time. What are Some Other Findings? In the survey, people mentioned several ways they worried that inflation can affect their financial lives. These concerns varied, from having the ability to cover healthcare costs to being able to travel, as the graph below shows. While concerns about inflation were clear, the survey indicated many Americans have a misunderstanding of inflation and how to address it. Overall, people overestimated typical cost-of-living increases in retirement. Those surveyed predicted an average 4.4% increase in the cost of living each year. And some respondents gave even higher annual predictions as to what they expected for inflation in retirement .   Despite these predictions, Allianz Life estimates average inflation over the last 20 years to be just 2.15%. From 1999-2016, annual inflation hovered in a range of 0.1%-4.1%. The graph below shows how costs increased each year during that timespan.   Sure, annual inflation has remained relative