Inflation spigot

It is not hard to find a news report or survey talking about the impact inflation is having on retirees, not that retirees are unique. For most, living on a fixed income is a myth because retirees are the only group of Americans guaranteed to get an increase on at least a portion of their income as the result of inflation.

The fact retirees have lower incomes in many cases is a different matter – caused by a life living on a low income or a life living without consideration for the future.

Regardless of your income source in retirement, you need a plan to deal with inflation.

Of course, there is always cutting back to spend less. Don’t laugh, it is quite possible for the middle class retirees.

The median income for Americans 65 and older is $50,290. The mean (average) is $75,020. Average annual expenditures for Americans 65 and older are $57,818. The average Social Security retirement benefit check is $1,907 as of January 2024 according to the Census Bureau

According to the BLS Consumer Expenditure Survey, retirees have five major areas of spending. Entertainment 6%, food 12%, health care 13%, transportation 14%, housing 36%. Believe it or not there are opportunities to save in all these areas to deal with inflation.

However, to avoid that unpleasantness start your retirement with a dedicated inflation bucket investment.

It’s nothing fancy or complicated, but merely have a modest pool of investments you do not tap for ongoing income, but only as needed to deal with inflation – some dividends paying stocks and interest paying bond funds perhaps. I use two dividend paying stocks and bond funds.

Leave the investments to grow until needed and then turn off reinvestment – open the spigot – to deal with inflation. Close it again and reinvest earnings when you can.

Even generating a $100 a month or so in income can help,