The theme this week on the Retirement Quick Tips Podcast is: Top Challenges Retirees Face In 2023

Today, I’m talking about a worry that hasn’t really been much of an issue for retirees in the last 10-20 years (until now) - inflation! 

With inflation running hot this year and peaking around 8%, it’s caused retirees spending to go up substantially, especially in relation to income. Because their portfolios have also declined this year and cost of living adjustments in things like social security aren’t coming until 2023, many retirees have been forced to cut back. 

I read recently that the overall cost of Thanksgiving this year increased by 20%. 

So when you have an inflationary environment for retirees that peaked at 9% this year, but you only plan on around 2.5% or 3% annual inflation for cost increases in retirement, you accelerate the negative impact of inflation substantially - cramming 3 years worth of cost increases into just one year.

The reality is that many retirement plans begin to break under sustained, higher than expected inflation. And it doesn't need to be 8% a year to be devastating in retirement. A sustained level of inflation of around 4-5% is enough to wipe out most of your annual investment gains and force you to cut your spending as the years go by, which means less enjoyment of your retirement years, and more anxiety of paying for everyday things like groceries, gas, and heat in the winter. 

And when you add to it the uncertainty about 2023 and beyond, it becomes even more problematic to plan around. If inflation stays above 4 or 5% for more than a few years, that’s enough to derail many otherwise solid retirement plans. 

Hopefully inflation will return to more normal long-term levels soon, but in the meantime, it’s important to adjust your spending and look for ways you can cut back so that you can keep your savings and financial accounts at healthy and sustainable levels. 

That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the Retirement Quick Tips podcast.  

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance