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Mistake #4: Ignoring Inflation’s Long-Term Impact on Your Spending Thumbnail

Mistake #4: Ignoring Inflation’s Long-Term Impact on Your Spending

General Retirement

Q: Why is inflation such a big deal in retirement planning?

A: Because most people will live 20–30 years in retirement. Even low inflation can drastically erode your purchasing power over that time—especially if your income is fixed or slow-growing.

The Quiet Threat Most Retirees Miss

  • Inflation doesn't feel urgent—until it compounds.
  • Over 20 years, 3% inflation nearly cuts purchasing power in half.
  • Healthcare, housing, and long-term care often inflate faster than average.
  • Without built-in income growth, retirees risk falling behind.

How to Protect Your Plan from Inflation

1. Include Growth Assets in Retirement

  • Stocks, especially diversified global equity, help offset long-term inflation.
  • Consider a rising equity glide path for longer retirements.

2. Ladder or Delay Income Sources

  • Delaying Social Security increases your inflation-adjusted benefit.
  • Laddering annuities or bonds allow for staggered income growth.

3. Use Buckets or Time Segmentation

  • Near-term needs are protected, long-term needs stay invested.
  • Keeps your growth engine running without risking your lifestyle.

Real Example – The Impact of Ignoring Inflation

A retiree in Portland was withdrawing $6,000/month from a conservative portfolio. After 10 years:

  • Their cost of living rose to $7,800/month.
  • Their portfolio couldn’t keep pace.
  • We rebuilt the plan to include equities and inflation-hedging strategies.

Now, they’re on track to meet future needs without sacrificing quality of life.

Conclusion: Inflation Doesn’t Retire—So Your Strategy Can’t Either

The dollars you need at 85 won’t go as far as the ones you spend at 65. Retirement plans that ignore inflation run out of steam just when you need them most.

As a Portland-based advisor, I help clients build retirement income strategies designed to grow with them—not just keep up. Take your complimentary RISA to find out what type of income structure fits your lifestyle and goals.

FAQs

Q: Isn’t inflation slowing down right now?

A: Short-term inflation varies. What matters in retirement is long-term inflation—your 20- to 30-year horizon.

Q: Can bonds or annuities protect against inflation?

A: Only if they have inflation adjustments. Most fixed-income products don’t keep pace on their own.

Q: What if I’m already retired—can I still adjust for inflation?

A: Yes. We help many retirees shift their strategy to add growth potential and protect their lifestyle.