Understand Inflation’s Effect on Your Retirement Expenses

Calculate Inflation’s Effect on Retirement

One of the biggest risks to retirement is not running out of money — it’s underestimating how much you’ll need because of inflation. Over time, even moderate inflation can significantly raise the cost of goods and services, altering your lifestyle and financial strategy. But will inflation remain moderate over time? We think not! This inflation calculator helps you estimate how your expenses may grow over time due to inflation. You can enter your current income (and let the inflation calculator approximate average expenses based on historical data) or supply your own monthly expense estimate. Either way, you’ll receive a projection of future expenses — adjusted for inflation — expressed in today’s dollars for easier comparison.

Inflation can quietly erode purchasing power of your fixed retirement income or retirement savings, especially over long time periods. To plan more thoughtfully for retirement, it helps to understand how today’s expenses could scale in the future. Learn the answer to how inflation may affect your retirement.

How to use this inflation calculator:

• Choose the mode: Income-based or Expense-based
• Enter your details, like age, projected retirement age, inflation estimate, and income or expenses
• Review the result: a comparative chart illustrating current versus projected expenses
• Download your report for review or sharing

You’ll see projected future expenses adjusted for inflation — presented in today’s dollars for easier comparison. You can also download a personalized report summarizing the projection, which makes it easy to review or share.

These projections are educational in nature and intended to illuminate how rising costs may affect your retirement lifestyle. Use as a guide to help refine your savings and spending strategy. Use them to help with retirement planning.

The Forgotten Daemon “Inflation”

If you were financially aware in the 1970’s and early 1980’s you may remember the double-digit inflation we had during that period. However, most retirees and pre-retirees had more fun pursuits than being worried about inflation back then. Money and inflation were not likely first on your young mind back then. But maybe you remember your parents saying their retirement plans were wiped-out by inflation. Many people on fixed incomes or fixed pensions saw their buying power evaporate.

Due to the low inflation over the last 30 years, most people have forgotten what an economic calamity inflation can be to someone in retirement. Low inflation (1-2 percent per year) over the past few decades has trained us to ignore the real danger of inflation. The nine plus percent inflation we had in 2022 only provided a short-term scare. However, the huge U.S. budget deficit, huge U.S. national debt, and international supply instabilities set the background conditions for double-digit inflation return in the near future. Does your retirement planning consider the return of high inflation? What happens when it does?

Please keep in mind that you need to seek out a financial advisor that understands the danger of inflation. Most financial advisors do not properly plan for high inflation. Their retirement plans simply assume that the past 30-years average inflation will continue. We consider this unlikely and that robust retirement planning should consider higher inflation. Do not make any financial decisions based solely on this inflation calculator. Everyone’s situation is different and requires a personalized approach.

Curtis Hill, CFP, IAR and Irina Hill, CPA, IAR, provide independent fiduciary financial advice, investment advice, retirement planning, and life insurance in the Long Beach, CA; Lakewood, CA; Carson, CA; Bixby Hills, CA; Signal Hill, CA; and Los Angeles, CA areas. We also provide advice and strategies to improve and secure your retirement lifestyle.

Go to the Calendley.com calendar link to schedule an appointment with investment and retirement planning experts Curtis Hill or Irina Hill. Discover strategies that consider how to combat high inflation in retirement.

Curtis Hill, Irina Hill, Serenity Wealth Management, and Portfolio Medics Inc. are not the authors of the inflation calculator and are not responsible for the content, or the accuracy of the inflation calculator. The inflation calculator was created by and powered by the good people at HEDGENESS Inc.