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Inflation Doesn’t Have to Derail Your Retirement Plan

Retirement planning can be difficult to maintain in a stable economy. But when inflation comes into the picture, those plans can fall off the tracks. The pinch at the gas pump and grocery store can make you think twice about contributing to your retirement account.

Let’s look at what happens, why, and what to do about inflation.

Inflation: Causes and Effects

Inflation is an increase in the price of goods and services that we buy and consume. For example, the price increases for basic needs such as clothing, food, gas, healthcare, housing, transportation, and utilities. Inflation is also measurable in the price of non-necessity items like high-end cosmetics, jewelry, and luxury vehicles.

This fluctuating and measurable rate is a reflection of what is happening in the economy at any given time. Looking at the causes and consequences of inflation helps us understand how this rate can affect our daily lives and future plans.


Many things can contribute to the rise or inflation of prices in an economy. Some determining factors include:

  • Monetary causes. Higher production costs, shortage of raw materials, higher wages, and rising customer demand contribute to an uptick in pricing. Governmental fiscal policies like taxes, interest rates, and government spending also affect prices.

  • Non-monetary causes. Natural disasters, war, population growth, monopolies, and pandemics can also cause price fluctuations.

The Consumer Price Index (CPI) and Product Price Index (PPI) are two figures that measure the rate of inflation.


While we may not always know the cause of rising prices, we sure do feel the effects! Some of the consequences of inflation are seen right away, but others are revealed over time.

  • Higher prices. Inflation can typically be seen in the price of groceries, gas, and other consumable goods. Because the cost of living is higher, our purchasing power has decreased.

  • Lowered values. Inflation can lower the value of pensions, Treasury notes, and savings accounts because the money in them has weakened in terms of what it is able to buy.

  • Increased interest rates. During inflation, interest rates usually rise because of the decrease in the purchasing power of money. Lenders charge higher rates to make up for money decreasing in value.

Retirement Planning

It’s no surprise that inflation can wreak havoc on retirement accounts. It is sobering to realize that what you’ve managed to build up over the years now is worth less than you thought it would be. Plus, who wants to continue to save for the future when you have some pressing needs right now? We’ve talked about planning for uncertain times, and it can seem like the more things change, the more they stay the same. Every time period has its uncertainties and the present is no different. Things to keep in mind regarding retirement accounts include:

  • Inflation happens. When you set up your 401(k), IRA, or other retirement account vehicle, you knew going into it that inflation would happen. Even Social Security checks automatically adjust for inflation.

  • Compound interest still works. Keep contributing to your retirement account, even if it’s not as much. What you do put in will continue to take advantage of the power of compounding interest.

  • Revisit your portfolio. Be sure you have the right mix of stocks, bonds, and other assets in your current portfolio. During times of higher inflation, certain assets have higher yields than others. Again, don’t take more risk that you can stomach.

Big Picture Goals

Inflation can affect the way we spend and save money. Take a breath, take a step back, and look at your big picture goals.

  • Is your goal to have your house paid off by the time you turn sixty-five? Keep paying towards that.

  • Perhaps one of your objectives is to have a certain amount in your 401(k) in ten years. Continue to contribute to it.

Inflation does not have to derail your retirement account and the plan that you currently have in place.

Minor adjustments in other areas of life can be implemented to help shield you from the worst effects of rising prices. Some ideas include:

  • Postpone big purchases. Currently, car and truck prices are up by double digit percentages compared to a year ago. Real estate and home prices are also high. Waiting until the market cools and prices start to come down, especially for items that aren’t immediately necessary, could be a good move.

  • Renegotiate APR on credit cards. Calling your credit card company and asking for a lower rate is something that costs nothing and could wind up saving you money. Other recurring expense items like car loans, cable bills, cell phone plans, home loans, and even streaming services can all be renegotiated for a lower rate.

  • Control what you can. So much is out of your control. Focus instead on the things you are able to control! Limit spending on unnecessary items. Cut back where you can. Get a side hustle to make some extra income. Concentrating on what you can do rather than what you can’t is also good for overall mental health.

Final Thoughts

Don’t let inflation rates and rising prices derail your retirement planning. Staying steady and making minor changes where needed is the best course of action. If you don’t have a retirement account yet, now is the best time to set one up.


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