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Navigating Inflation’s Impact on Retirement

Inflation, often called the “silent thief of wealth”, can have significant implications for people in various stages of life–especially those nearing retirement.

The inflation report has recently been a hot topic, with the Consumer Price Index (CPI) revealing some noteworthy figures. In this blog, we’ll delve into what the latest inflation report means for retirees in Iowa and how they can adapt to these changing economic conditions. Here’s what you need to know.

Understanding the CPIiowa fiduciary

The Consumer Price Index (CPI) is a crucial economic indicator that measures the average price change paid by urban consumers for a basket of goods and services over time. The CPI increased by 0.1%, and on a year-over-year basis, it was up by 3.1%. However, when we exclude the volatile food and energy prices, the core CPI showed an even more significant increase of 0.3% for the month and a whopping 4% increase over the past year. 

The core CPI is a valuable metric for assessing the underlying trend in inflation because it excludes the often erratic fluctuations of food and energy prices. These two categories can experience significant short-term spikes due to weather events, geopolitical tensions, or supply chain disruptions. Consequently, excluding them provides a clearer picture of the broader inflationary trend. Let’s break down these numbers and their implications for retirees.

iowa fiduciaryImpact of Rising Prices

For retirees, these inflationary trends carry specific implications. Retirees often live on fixed incomes, relying on pensions, Social Security, or withdrawals from retirement accounts. Their purchasing power diminishes when prices rise, making it increasingly challenging to cover everyday expenses.

The year-over-year CPI increase of 3.1% means that, on average, the cost of the goods and services retirees typically consume has risen by that percentage. Even when we exclude food and energy prices, as the core CPI does, retirees still face a considerable 4% year-over-year cost increase. This suggests that inflation significantly affects housing and healthcare, often not included in the core CPI calculation. Consequently, retirees must account for these rising expenses in their retirement income planning.

Having a Comprehensive Retirement Plan

Retirement planning is one of the most important financial life events people need help with. Many variables are associated with planning and saving for retirement, and it can be overwhelming to plan for these later years in life. Factors like inflation can certainly affect the amount you save and invest. Given the rising inflation figures, retirees must proactively manage their finances effectively and help protect their retirement savings. Here are some strategies to consider:

  • Diversify Investments: Review your investment portfolio focusing on inflation-resistant assets like stocks, real estate, and Treasury Inflation-Protected Securities (TIPS). These can help preserve your purchasing power.
  • Tax-Efficient Withdrawals: Optimizing your withdrawal strategy can minimize tax implications on your retirement income. Explore strategies such as Roth conversions or managing tax brackets.
  • Have a Long-Term Care Plan: Understanding long-term care costs is important. Annually, Americans collectively spend a substantial $475.1 billion on long-term care, and more than one-third of U.S. adults will use long-term care nursing facilities, which can cost more than $100,000 a year. To navigate this terrain effectively, research your state’s current expenses associated with home care, assisted living, and nursing homes.
  • Seek Professional Advice: Consult a financial advisor. They can help you tailor your financial strategy to specific circumstances and goals.

A Fiduciary Advisor can help you calculate the funds needed for your desired retirement lifestyle. They can help you optimize your retirement savings accounts, suggest tax-efficient withdrawal strategies, and more. 

Working With Johnson Wealth and Income Managementiowa fiduciary

The latest inflation report emphasizes the importance of staying vigilant and adapting to changing economic conditions. Inflation can present challenges for retirees, but they can weather the storm with careful planning and adjustments to their financial strategy. 

At Johnson Wealth and Income Management, we provide our clients with the tools they need to help achieve their financial goals. Our Fiduciary Advisors help align with your long-term financial goals, simplifying the often complex realm of financial planning. Here are just a few of the areas in which we excel:

  1. Retirement Planning
  2. Estate Planning
  3. Investment Planning
  4. Money Management
  5. Insurance Options
  6. Tax Strategies
  7. Lifestyle Balance

Our mission is to empower you with knowledge and guidance to make informed financial decisions, ultimately leading to a more secure and fulfilling retirement.

Stay Informed with Our Financial Podcast and YouTube Show

Are you eager to stay up-to-date with the latest 2024 financial news and insights tailored to retirees and those on the brink of retirement? Johnson Wealth and Income Management is committed to providing you with valuable resources to empower your financial decisions:

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1. Capitalized Life and Retirement Podcast
Tune in to our engaging and informative podcast series, where our owner and president, Matthew P. Johnson, dissects the most relevant current financial events. We discuss topics such as inflation, investment strategies, retirement planning, and much more. Our goal is to keep you informed and equipped to navigate the ever-changing financial landscape confidently.

Listen to the Podcast

2. Capitalized Life YouTube Show
For a visual and interactive experience, don’t miss our Retirement YouTube show. Join us as we delve into current financial events, share market analyses, and provide actionable tips for retirees and pre-retirees. Subscribe to our channel to receive regular updates and exclusive content.

Watch on YouTube

For personalized financial guidance and retirement planning, our Fiduciary advisors are here to help you achieve your financial goals and enjoy a secure retirement.

Contact us today to schedule your complimentary retirement strategy session.

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