Americans Are Worried About Inflation in Retirement, But Few Are Taking Action to Prepare

Experts say there are things pre-retirees and retirees can do to prepare for a retirement that could last 20 to 30 years.

Fifty-seven percent of Americans are worried that inflation will make basic retirement expenses unaffordable, Allianz found in a survey that formed the basis of its “2020 Retirement Risk Readiness Study.” Furthermore, 48% of retirees and 62% of non-retirees have no idea how much they currently spend or will spend on health care in retirement.

Despite these concerns, only 24% of Americans are discussing the impact of inflation with a financial professional, and a mere 21% say they will look for a financial product that can increase their income to help address inflation.

Kelly LaVigne, vice president of consumer insights at Allianz Life, tells PLANADVISER that inflation should be a concern for every retiree. “Even if it averages 3% over the course of retirement, within 24 years, a retiree’s cost of living is going to double. Everyone knows that inflation makes things more expensive over time, but few seem to appreciate that rising costs can also bring more complexity, which is particularly concerning as we age and our cognitive ability declines,” LaVigne says. “It is already challenging to establish and maintain reliable sources of retirement income. The additional pressure of managing increased expenses can pose a risk to financial security if people don’t have a strategy for increasing income built into their retirement plan.”

LaVigne says there are steps people can take to mitigate inflation risk. “The first is working with a financial adviser, who can have a better handle on their needs,” he says. Allianz learned in its survey that people are afraid to talk about their concerns, so it is critical that if someone goes to the trouble of hiring an adviser that they are straight with them, LaVigne says.

The next thing people should do is wait as long as they can to take their Social Security benefit, LaVigne says. “If you think about it, Social Security is one of the few guaranteed sources of income that is supposed to last your lifetime,” he says. “It also has a cost-of-living adjustment [COLA] built in.”

Social Security benefits can increase in value by 25% to 30% with a delayed start date, he notes.

The third thing people can do is to invest in products that keep up with inflation, such as an immediate annuity with a COLA rider, or guaranteed income that promises to keep up with inflation, LaVigne says.

Steve Vernon, president of Rest-of-Life Communications, says he wholeheartedly agrees that delaying taking one’s Social Security benefit is key. People can live off of what they have saved for retirement in the interim, Vernon says.

For those who are wary of purchasing an annuity, there are platforms that can bid an inquiry out to multiple insurers to find the most attractive contract and price, Vernon says. Two examples of this are and, he says.