Is Your Hard Earned Retirement Safe From Inflation?

In recent months, we have all felt the impact of inflation, whether in a grocery store, a petrol station, or a restaurant. However, growing costs threaten not only our ability to spend now, but also our ability to fund our retirement.

If you want your money to survive, you might need to considerably cut back on your spending if your retirement income and savings need to keep up with inflation. Most households want to maintain a particular level of life, not just a set monetary amount.

Various retirement fund sources differ in their ability to — or lack of ability to — guard against inflation.

Social Security & the Cost of Living

90% of Americans over 50 express concern that current or future Social Security benefits won’t keep up with inflation, but Social Security may offer the best protection against inflation of all retirement options. These include benefits such as a yearly “Cost-of-Living Adjustment” as built-in inflation protection (COLA).

Social Security benefits grow proportionately when a government measure of consumer prices shows an increase from year to year. The highest benefit increase in more than 40 years will occur in 2024, with a COLA of 8.7 percent.

Because the COLA considers price fluctuations from the prior year, Social Security’s inflation protection is not flawless. For instance, the 5.9 percent adjustment for 2022, predicated on price rises in 2021, was swiftly surpassed by the year’s soaring inflation. However, it offers a reliable defense of retirees’ purchasing power over time.

Savings and Investments

Investments made in a 401(k) or individual retirement account are not indexed for inflation. They fluctuate in value with market fluctuations and only offer price protection to the extent that your rate of return is equal to or greater than the rate of inflation.

However, you can change the amount you remove from the account once you start doing so to account for inflation.

Taking out 4% of your retirement assets in the first year of retirement, for instance, then adjusting for inflation in subsequent years is a systematic withdrawal method. Therefore, if the inflation rate is 3 percent and 4 percent of your retirement assets equal $20,000, your subsequent withdrawal would be $20,600 ($600 is 3 percent of $20,000).

Stocks with dividend payments are included in some investment funds. These can offer a steady income stream and help alleviate some of the losses brought on by inflation.


Data from the U.S. Census say that 30% of older persons have a typical job pension. However, its use as a source of retirement income has significantly decreased in recent decades. Depending on the company offering the pension, it may or may not adjust for inflation.

Private company pensions usually do not have COLAs, but many pensions in the public sector do; the adjustment is frequently capped at a certain level.

Fortunately, there are strategies to lessen the impact of inflation on your long-term financial stability, some of which are inherent in specific income streams and others that depend on the context of your daily life.