Retirement Read Time: 4 min

How to consider inflation into your retirement strategy

Inflation is back in the news, and back on the radar of many Americans for the first time in years. For the fiscal year that ended in June 2022, consumer prices in the United States rose 9.1% — the highest rate in over 40 years.1 Americans are facing price increases on everything from a gallon of milk to an overseas vacation. Many who feel the sting wonder, how long will this last? What will inflation look like in the long term? And how will it affect my ability to retire down the road?

The impact of inflation on retirement

Some people fondly think of retirement as the time in which you’re no longer working. That’s great, but it’s also the time when you’re no longer earning a paycheck. To account for this, many retirees live off a source of fixed income, such as Social Security or a pension, and supplement that income through sources such as annuities or earnings in an investment portfolio.

Traditionally, this is a solid strategy. However, when inflation hits at record levels, people have less buying power. Simply put, your income today will not cover the same level of expenses as it did last year.

The retirement risk that inflation poses

During heightened inflation, when earnings stay the same and expenses grow, people should revisit their budgets. The logical answer is to either reduce costs or increase income, but for retirees, there is no boss to ask for a raise. Instead, the temptation is to take more money from your investment portfolio. This can be tricky because you don’t want to take out too much and risk not having enough for your latter years. And if the market falls into a recession, you may be impacted further.

Consider inflation in your retirement strategy now

Until recently, inflation was an afterthought for most people. For example, in the United States, during the thirty years from 1991 to 2021, the monthly average inflation rate was 2.3 percent, with only four brief spikes to five percent during that time.2 Meanwhile, as people devised their retirement strategy, they factored in variables such as desired lifestyle in retirement, projected longevity, their tax bracket and more. Now people should add various inflation scenarios into their retirement strategy.

A financial professional can help

In 2021, a study revealed that people who feel the most confident about their long-term financial strategy exhibit a few key behaviors. First, they write down a financial strategy and stick to it. Secondly, nearly two-thirds of this group work with a financial professional. In doing so, they gain a professional in developing a custom strategy for their retirement goals. When the going gets rough because of inflation or a recession, their financial professional helps keep them on track for the long haul.

How to mitigate the effects of inflation on your retirement

Financial professionals are versed in products that can help mitigate the impact of inflation on your retirement strategy, particularly if you’re getting close to retirement age. Talk with them about potential options, such as buying an annuity with an inflation rider3 or a Treasury Inflation-Protected Security (TIPS) from the U.S. Treasury. Together you’ll determine the appropriate path forward for you.

Regardless of whether this period of inflation proves short lived or not, it’s crucial to stay focused on your long-term financial strategy. Your financial professional can help you create a resilient strategy to meet your retirement goals.



1 U.S. Bureau of Labor Statistics, July 18, 2022

2 Pew Research Center, June 15, 2022

Optional riders are available for an additional premium. The Cost of living adjustment (COLA) rider is not necessarily protection against increases in the cost of living.


This material is intended for general public use. By providing this content, The Guardian Life Insurance Company of America, and their affiliates and subsidiaries are not undertaking to provide advice or recommendations for any specific individual or situation, or to otherwise act in a fiduciary capacity. Please contact a financial representative for guidance and information that is specific to your individual situation.

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2022-144185 Exp. 9/2024

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