The Cost of Living Is Rising. Here’s How to Make Sure You Won’t Run Out of Money in Retirement

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If you’re worried about rising prices impacting your retirement, you need to read this. 

Thanks to supply chain issues and other factors, prices have gone up dramatically recently due to record-high inflation. The Federal Reserve has also raised interest rates in an effort to curb those price increases. That has made mortgages and variable-rate debts like credit cards much more expensive.

Unfortunately, inflation can be especially bad news for retirees who typically live on a fixed income and rely on savings to help support them. Seniors typically need to be invested conservatively to avoid taking on too much risk, and they may also have a lot of money in savings accounts. That means they may lose ground during periods of high inflation because their returns don’t keep up with rising prices.

Whether you are currently retired or are planning to leave work in the future and are concerned about the impact of rising prices, there are things you can do to try to ensure your financial security even during tough times.

How current retirees can avoid running out of money

If you are currently retired and worried you’re at risk of running out of money due to rising prices, there are a few things you should do ASAP.

Make sure you are maintaining a safe withdrawal rate. You don’t want to take too much money out of your investment accounts because this can reduce future returns and increase the risk of you running out of money. Consider using the IRS-required minimum distribution tables to help you set a safe withdrawal rate.Consider downsizing. If you can reduce your housing costs by moving to a smaller, cheaper place, this can give you a lot more wiggle room.Look into relocating. If you’re really worried about running out of money, look into moving to a city with a cheaper cost of living. While drastic, this could save you a lot of heartache if it allows you to preserve your funds.Rework your budget. You may need to substitute cheaper products for pricier ones, such as by switching to more plant-based meals.Shop for Medicare coverage carefully. There are different options for getting insurance. Since healthcare is a huge monthly cost for many seniors, it’s important to pick a plan that keeps your out-of-pocket spending to a minimum.

How future retirees can avoid running out of money

Future retirees should also take steps to make sure they don’t have to worry about running out of money.

Assume you’ll have to retire early. Don’t count on being able to work until 70, as you may be forced out of the workforce ahead of schedule. Be sure your savings goals are set so you’ll be OK if you have to retire at 62.Save more than you think you’ll need. It’s better to choose to make sacrifices now rather than being forced into them in your 80s. So consider working a little extra or making some big spending cuts to bulk up your savings.Invest wisely. Be sure you’re exposed to an appropriate level of risk in your brokerage account throughout your career so you can maximize your potential returns while limiting losses.

By following these tips, you can help ensure you have a secure retirement even as prices have gone up.

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