Purchasing Power
Inflation: The Silent Tax on Your Retirement
Most people experience inflation at the grocery store, the pharmacy, or when they renew their insurance — not in a chart. You don’t need an economist to tell you that the cost of living has jumped sharply in recent years. But what often gets missed is how inflation quietly reshapes retirement, especially when markets are already expensive and interest rates are unstable.
My concern is simple: if your plan still assumes “normal” inflation and “normal” markets, you may be relying on a world that no longer exists.
Inflation Has Already Done Its Damage
Official inflation statistics can make things look calmer than they feel. Methodology changes, substitutions, and “core” measures all tend to smooth out the story. But if you look at the actual things retirees spend money on — food, utilities, healthcare, repairs, travel to see family — the reality is harder to ignore.
- Everyday essentials have risen much faster than many salaries and fixed pensions.
- Cash and low-yielding bonds have lost real purchasing power, even if the account balance looks similar on paper.
- Many retirees are discovering that “what used to be enough” no longer stretches as far as it did even a few years ago.
Inflation doesn’t show up as a single dramatic event. It shows up as a long series of small compromises — fewer trips, postponed repairs, cutting back on things that used to be easy “yes” decisions.
Why This Inflation Cycle Is Different
We’re not just dealing with a brief uptick in prices. We’re dealing with the after-effects of years of near-zero interest rates, massive money creation, and record debt across governments, corporations, and households.
When you create this much new money in a short span of time and push asset prices to record levels, something has to give. That “something” is usually the value of the currency and the reliability of traditional “safe” strategies.
- High valuations and higher inflation can exist at the same time — a painful combination for people who rely on their portfolios for income.
- The old assumption that “stocks always outrun inflation” isn’t guaranteed when markets start from bubble territory.
- Central banks can raise and lower rates, but they can’t undo the permanent loss of purchasing power that’s already occurred.
In other words, this isn’t a normal hiccup. It’s part of a larger reset after years of artificially easy money.
What Inflation Looks Like in a Real Retirement Plan
For someone still in their 30s or 40s, inflation is a problem — but there’s time to adapt. For someone in their 60s or 70s, the stakes are higher. A long stretch of elevated inflation can quietly change what retirement feels like, even if your balances look okay.
- A “safe” withdrawal rate from a portfolio may need to be lower if prices are rising faster than expected.
- Social Security cost-of-living adjustments help, but they often lag the real increases people feel.
- Healthcare, property taxes, insurance, and repairs — the big irregular expenses — often rise faster than the headline numbers.
The risk isn’t just that things cost more today. It’s that your plan may quietly drift off course if inflation assumptions stay too optimistic.
How I Build Inflation Into Your Planning
In my practice, I don’t treat inflation as a background assumption. I treat it as a central risk that must be addressed directly. That includes:
- Using more realistic inflation assumptions in planning, not just long-term historical averages that smooth out recent spikes.
- Stress-testing retirement income against higher cost-of-living scenarios, so you can see what happens if inflation stays elevated longer than expected.
- Considering assets and strategies that have historically held up better when currencies are being diluted and real yields are low.
The goal isn’t to eliminate inflation — no one can. The goal is to avoid waking up ten years from now and realizing that your “comfortable plan” no longer matches the world you’re actually living in.
A Call to Protect Your Purchasing Power
If you feel like your dollars aren’t going as far as they used to, you’re not imagining it. Inflation has already done real damage, and the official story often understates the impact on everyday life — especially for retirees.
If you’d like a second opinion on how inflation, valuations, and today’s policy environment might affect your retirement plan, I’d be glad to walk through it with you in plain English.
Reach out to us todayYou can’t control inflation or central bank policy. What you can control is how your assets are positioned, how your plan is structured, and whether your strategy matches the times we’re actually living in — not the world we left behind.