How Does High Inflation Affect My Retirement?

How Does High Inflation Affect My Retirement?

When something is referred to as a “silent killer”, oftentimes you assume it’s a disease or health crisis that is being talked about. In our industry however, the silent killer is inflation. Much like heart disease or osteoporosis, inflation can slowly creep up unnoticed for years, even decades, until serious problems arise that cannot be ignored. What was once affordable is now too expensive.

Inflation will most likely never cause a frugal person to go broke but it can cause a frugal person to live like they are broke. When you put your retirement plan together, make sure to plan for an inflation rate that is along the lines of long-term historical inflation. At Barber Financial Group, we like to use 4% or higher as an inflation rate.

It’s also crucial to understand that different things inflate at different rates. For example, your healthcare expenses will most likely inflate much faster than the cost of food. When you’re putting your retirement plan together it’s always a good idea to break out your spending in different categories, do some research on how those different categories have historically inflated, and then apply different rates of inflation to see how it affects your spending goals.

One of the biggest mistakes that we see being made in the financial planning industry and especially for a do-it-yourselfer is applying the same rate of inflation across all spending. Let’s take your home for example. If you happen to carry a typical mortgage into retirement and that payment is $1000 per month, most likely that payment will not change. In this scenario, you will not need to apply inflation to that portion of your budget. You will also have a finite ending date for your mortgage. On the other hand, you will likely have the need to replace your vehicle, buy a new furnace or air conditioner, or perhaps put on a new roof. All of these things will continue to inflate and need to be considered prior to your retirement date so that you can account for those potential expenses in the future.

As you monitor your financial plan you need to continue to update your budget and the inflation rates that are being applied to each separate part of your budget. This will help ensure that inflation never sneaks up on you and erodes your standard of living.

If you have questions or would like to learn more about how you can monitor the effects of inflation on your retirement, we are happy to talk (even if you aren’t a client of Barber Financial Group!) call our office today at 913-393-1000 or click below to make your appointment.

Dean Barber

Founder & CEO


If you have questions about your financial goals and how to attain them, please click below or give us a call at 913-393-1000. We’re always ready to start the conversation with you.

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