Should you be worried about inflation in retirement?

Today, we are going to discuss why you should not panic and instead do these 3 things to have a financially healthy retirement.

Inflation in Retirement

Full transcript:

SPEAKERS

Alex Okugawa & Anthony Saffer

Alex Okugawa 0:00
Inflation is still really high. So should you be worried about inflation in retirement? Today, we’re going to discuss three things that you can do. So you don’t have to worry.

Either it’s Alex and Anthony, from One Degree Advisors. If you’re new here, we are Certified Financial Planners that help folks with all things tax, retirement, and investment related. Anthony. So inflation is up eight and a half percent for July, which, you know, is kind of a good sign, right? We saw 9.1% inflation in the month of June. And that’s a good thing. You know, we see inflation come down just a little bit.

Anthony Saffer 0:36
Right. So inflation was eight and a half percent over the last year, the good news is that it didn’t increase from the previous month, which was the point that President Biden was trying to get across there. But the thing is, it’s still high. And it affects retirees adversely because retirees tend to live on a fixed income, so it can be worrying.

Alex Okugawa 0:53
Yeah. So what we want to do is today is talk about the three things a current retiree can do, so they don’t have to worry about inflation. For the folks that are not yet retired or thinking about retirement, we did post a video, just talking about how to prepare for that retirement, especially when inflation is high. But let’s keep this really simple. You know, everyone’s situation is unique. But today, we’re going to provide three solutions or at least three ideas that people need to focus on. So they don’t have to worry. The first thing is to refocus your big picture.

Anthony Saffer 1:27
And this is where you do want to start what we’re trying to say here’s really widen the lens, go back to your overall plan. What convinced you in the first place that you could retire successfully? You know, when you look at your plan, did you have a cushion built in? Did you assume that there was an inflation rate? Did you know? Did you factor that in basically? Did you look at your expenses and say, Yeah, I can manage this going forward? And if you can answer yes to those things, then having that comfort of okay, I’ve already planned for this. I don’t need to worry, just because I’m we’re actually there at this point.

Alex Okugawa 2:02
I mean, especially for clients of One Degree. I mean, I know that’s one of the things where when we were running retirement projections for folks, let’s say five years ago, and we’re using an inflation rate in their plan, that was maybe a little bit higher than the current rate, we did that because there’s uncertainty, right, inflation could be higher in the future, which, you know, it turns out it was. But that’s the point you want to be maybe a little bit conservative in your projections. And that’s where especially projecting out over longer periods of time. That’s the kind of thing that a financial advisor can help you with, it’s certainly something that we’ve been helping folks with, so that it gives them the confidence to say, yes, we were planning on higher inflation, we have a cushion, things are going to be okay, there’s still a lot of unknowns out there. But we were kind of planning for some of these unknowns. The second thing here is to note your income sources.

Anthony Saffer 2:55
I’m gonna put this chart up here is where you want to look at each source of income that you have coming in, write it out, and then write down the amount that you’re earning from that. And then the third thing is to write out if are you receiving a cost of living adjustment. So an example of like rental income, it may not be something where you’re just, it’s automatically increasing, but it’s where it can adjust for inflation periodically, social security, for instance, last year, I think it rose by 5.9%, people are expecting that it’s going to be much higher in terms of a cost of living adjustment, and that’ll help retirees out, there may be other things, investment withdrawals, where you have a little bit more flexibility, you can increase it with the cost of living, of course, you want to be able to look at that with a keen eye so that it is sustainable. You may have something like a pension where it’s just flat. And it’s good to know that

Alex Okugawa 3:46
Listing out those income sources, what will go up over time, or what is automatically built into go up versus the things that aren’t, can help you dissect, okay, what income sources may have to cut back depending on the level of inflation, how those investments are doing? So that again, we don’t run into, in many cases or retirees’ biggest fear, which is, you know, am I going to run out of money? And do I have to go back to work, right, those are the things that we want to avoid? And that’s where, again, having a good plan, and listing those things out is incredibly helpful. Alright, the last thing here, which is kind of similar to the income source, but the exact opposite, which is to list your expenses.

Anthony Saffer 4:25
Yeah, and we list out our expenses. You know, the point here, if we don’t feel entirely comfortable with points one and two is that we may be able to cut back a little bit. And that may sound like a bad thing to a retiree, but think of it as more empowering. When you do list it out. You can say, Okay, what’s not quite as important where I can pull back on that. So the things that are needed, and then the things that are really high priorities, maybe I don’t need to cut back on and I can choose where I want to reduce.

Alex Okugawa 4:53
Let us know what you think. How are you handling inflation in retirement? Are you cutting back on some things have you not changed? Is your lifestyle at all leave your thoughts in the comments down below and if you enjoy today’s video please like and subscribe for more thanks for watching.

Transcribed by https://otter.ai

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