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Imagine that after diligently saving for retirement for decades and finally reaching your goal, you find that your living expenses are all more expensive than you had planned for. Gardening tools? Plane tickets? That piccolo you were hoping to learn to play? They all cost much more than when you started saving.

This is the lingering power of inflation and its effects on your savings. And it鈥檚 something you and your financial advisor should plan for when defining your retirement goals. 

鈥淲ithout taking into account the likely impact of inflation over time, your planned retirement savings goal might not be enough to support you in the future,鈥� says Amy Blacklock, co-founder of a personal finance blog.

Inflation and retirement don鈥檛 need to be a bad combination. Everyone from young savers to retirees should understand how inflation affects retirement. You can plan accordingly with these tips from the experts.  

Why retirement planning must consider inflation

When inflation strikes, even routine trips to the grocery store can get stressful. The food at home index rose 0.5% in March 2025 as four of the six major grocery store food group indexes increased, according to the .

鈥淚nflation reduces your money鈥檚 purchasing power, so you can鈥檛 buy as much with the same dollar amount over time,鈥� says Alana Benson, a writer focusing on investment topics. 

For younger people, inflation can make it harder to sock away retirement funds, whether in a Traditional or Roth IRA or a 401(k) provided through an employer.

鈥淵ounger investors should try to make space in their budget to invest for retirement even as inflation pushes the price of everyday goods higher,鈥� Benson adds. If that鈥檚 not possible now, don鈥檛 let it deter you from setting goals for when to start saving. Stay focused on the future: 鈥淚f you鈥檙e just starting out in your career, it鈥檚 likely that your income will rise over time and allow you to start saving for retirement.鈥� She suggests increasing contributions little by little with each pay raise or job change.

Remember: Prices are always in flux, but inflation trends up over time. 鈥淥ver the years, inflation can significantly erode the purchasing power of your money, making it more difficult to cover even basic living expenses,鈥� Blacklock says. She notes that inflation should factor into the retirement plans of people of all ages. 

Luckily, there are ways to factor inflation into retirement planning, no matter what stage of life you鈥檙e at.

How to factor inflation into retirement planning 

When considering inflation and retirement, Blacklock recommends using a retirement calculator with inflation factored in. This will allow you to adjust your inflation and spending assumptions for different scenarios. 鈥淐alculators that allow for a wide range of assumptions are excellent tools for planning out a pleasant retirement and keeping you on track to save enough money each year to reach your future goals,鈥� she says.

With a retirement calculator, you can pressure-test your savings plan for unexpected inflationary spikes. , inflation ascended to 12.2% in 1974, 14.6% in 1980, 9.1% in 2022, and is now at 2.8% as of February 2025. Between 1986 and 2020, Bankrate notes that inflationary spikes weren鈥檛 as common, and the average annual inflation rate was about 2.5%. Even if inflation seems to be under control, Blacklock encourages you to factor double-digit inflation rates into a retirement calculator to see if your savings could still allow you to cover the added costs in living expenses.

But using a factored in is just one tool of many that you鈥檒l need, Benson says. It鈥檚 also important to consider personal spending, income, existing investments, and any personalized advice from a financial advisor as well.

How to protect your retirement savings against inflation

Saving for retirement is a long journey. To future-proof your financial security along the way, Blacklock recommends these practical steps to ensure inflation is front of mind when retirement planning:

• Know how much you spend on goods and services today and project your future costs using a retirement calculator with inflation factored in. 
  鈥淭his will help you set realistic goals for retirement savings to maintain your current lifestyle,鈥� Blacklock says. 

• Save and invest early and often to give your money time to grow. 
  鈥淲hile compounding isn鈥檛 magic, you may be surprised that time in the market may matter more than how much you invest,鈥� she notes.

• Utilize tax-advantaged accounts. 
  鈥淭hese accounts include Roth IRAs, 401(k)s, HSAs, and 529 plans that can help you shield your funds from inflation鈥檚 bite over time,鈥� Blacklock explains. 

• Choose investments that have historically kept up with or exceeded the inflation rate. 
  鈥淭hese investments may include real estate, stocks, bonds, commodities, or collectibles with a good resale value,鈥� she says.¹ Blacklock also recommends looking into government-issued Treasury Inflation-Protected Securities (TIPS), which are designed to reduce the impact of inflation on your investments.

• Be mindful of interest rates, fees, and expenses associated with different investment products. 
  Blacklock points out that online banks typically provide savings products that feature higher interest rates than traditional banks do. (Compare the annual percentage yield and no account fees of the pp电子官网^庐 Online Savings Account to what other banks offer to see for yourself.) 鈥淭he account fees that some banks charge may eat away at your earned interest, so it鈥檚 important to be strategic about where you put your money,鈥� she adds.

These tips can help you mitigate the effects of inflation on your retirement plans at any stage of your savings journey. Still, Blacklock and Benson agree that the inflation risk gets especially critical the closer you get to retirement.

鈥淭hose who are close to retirement have a lot to lose from high inflation,鈥� Benson says. 鈥淪ince inflation erodes their money鈥檚 purchasing power, all the money they鈥檝e saved for years can suddenly buy less than it could a year ago.鈥�

To protect your retirement savings from inflation, Benson suggests working with a financial advisor who can ensure you鈥檙e invested in a well-diversified portfolio. 鈥淭his can help buoy your portfolio during turbulent markets,鈥� she says. 

You can also look into assets that may protect against inflation, she adds. 鈥淔or example, Series I savings bonds, commonly referred to as 鈥業 bonds,鈥� are bonds backed by the federal government,鈥� she says. Benson notes that I bonds have a lot of specifications and fine print, so it鈥檚 worth speaking with a financial advisor to see if they鈥檙e suitable for your financial goals. 

If you鈥檙e nearing retirement, Blacklock adds that it鈥檚 also a good idea to consult with a financial advisor about investing in index funds or exchange traded funds (ETFs) if you aren鈥檛 already. 鈥淚ndex funds and ETFs track broader markets and may be less risky than individual stocks or bonds,鈥� she says. 

One more tip from Blacklock: Have some cash and liquid investments on hand that you can use to cover rising expenses in retirement if inflation hits. 鈥淭his allows you to avoid the unplanned selling of other assets in a down market,鈥� she says.

Taking these steps can help shield you from how inflation affects retirement. But even after you retire, inflation still needs to be accounted for.

How to protect your savings against inflation while living in retirement 

Retirement means it鈥檚 time to relax鈥攏ot worry about inflation. Unfortunately, prices can suddenly jump, so it鈥檚 wise to be financially prepared. 

So, why are retired people hurt by inflation?

鈥淩etirees don鈥檛 necessarily have income, meaning they need to make that lump sum last as long as possible, and high inflation erodes those savings,鈥� Benson says. 鈥淚f you have a lump sum of money that could provide a year鈥檚 worth of groceries, with high inflation, it may only be able to buy a few months鈥� worth.鈥�

Who鈥檚 most at risk? Income sources and lifestyle can determine your inflation exposure, Blacklock says. For example, people relying on Social Security could find that their purchasing power is reduced because their monthly checks don鈥檛 increase with inflation. 

鈥淩etirees who are living off their investments, on the other hand, may benefit from inflation in some cases and be hurt in others,鈥� Blacklock says. Rising prices may make investments more valuable, but having to sell stocks in down markets to cover rising expenses can be detrimental. 鈥淭his is why it鈥檚 essential to monitor inflation and adjust financial strategies accordingly,鈥� she adds.

It’s time to ask yourself: 鈥淗ow long will my retirement savings last with inflation?鈥� One of the best ways to get an answer is to look at your income and current spending (reflective of higher prices) to see how long your savings will last if inflation remains high, Blacklock says. 

鈥淭his means reevaluating your basic living costs, as well as any other expenses, such as medical bills or emergency expenditures, and then revisiting inflation and retirement calculators,鈥� she says. You may find that you need to cut back on unnecessary spending and/or add income sources where possible to stretch or bolster your retirement savings.  

Want to limit the impact of inflation during retirement? Take these actions, Blacklock says:

• Utilize budgeting and expense tracking tools. 
  There are a lot of apps that can connect to your bank accounts to make it easy. 

• Save where you can. 
  Cut costs where possible, stock up during sales, and apply discounts and coupons. Free or reduced-cost local or government services may also provide a boost.

• Maintain investments in assets that tend to increase when inflation rises. 
  These can include stocks, bonds, real estate, and some commodities. 

• Allocate money to accounts that still yield interest. 
  Blacklock suggests retirees should set aside enough cash in a high-yield savings account or money market account and consider laddering Certificates of Deposit (CDs) or bonds to cover basic essentials like food and housing during rising inflation and volatile markets.

• Consider additional streams of income. 
  Taking on a part-time job or side hustle can help ease the financial burden or rising costs due to inflation.

• Review your housing expenses and consider the benefits of downsizing or relocating if necessary. 
  Consider options to reduce expenses such as downsizing by selling things you no longer use or need, moving to an area with a lower cost of living, or even merging households with a loved one.

Of course, before you make any significant financial moves in retirement, speak with a financial advisor first, Benson says. 鈥淭hey can help you calculate your living expenses and figure out how inflation will impact your bottom line,鈥� she says.

Don鈥檛 let inflation get in the way of a stress-free retirement

Inflation is inevitable. But with proper planning, how inflation affects retirement is largely up to you, Blacklock says. 

Benson agrees: 鈥淭he big-picture view is that high inflation does not last forever. It certainly should not keep you up at night, especially if you have an emergency fund and a well-diversified portfolio. If you don鈥檛 have those things, it鈥檚 not the end of the world. Focus on saving between three and six months鈥� worth of living expenses and go from there.鈥�

Looking for a safe, tax-advantaged place to keep your retirement savings? Learn about an IRA savings account and how it can work for you. 

*The information provided herein is for informational purposes only and is not intended to be construed as professional advice. Nothing contained in this article shall give rise to, or be construed to give rise to, any obligation or liability whatsoever on the part of pp电子官网 or its affiliates.

¹ pp电子官网 does not sell non-deposit investment products (鈥淣DIP鈥�) or provide recommendations regarding NDIP. NDIP are NOT FDIC insured.

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