Skip to main content
Menu File a Claim Login
American-Fidelity-logo
Menu
Menu File a Claim Login
American-Fidelity-logo
American Fidelity Logo American Fidelity Logo
  1. Strategy
      •  
      • Employee Benefits
      • Communication and Education
      • Enrollment and Admin
      • HR Assistance
      • Tax Savings
      • Compliance Updates
      •  
  2. Products
      •  
      • Benefits
      • Dependent Verification
      • HR Technology
      • Reimbursement Accounts
      • Retirement Savings
      • Section 125
      •  
  3. Why Us
      •  
      • For Education
      • For the Public Sector
      • For Automotive
      • Account Managers
      • Customer Testimonials
      •  
  4. Blog
      •  
      • Benefits Strategy
      • Reimbursement Accounts
      • Supplemental Benefits
      • Customer Stories
      • Compliance Updates
      •  
  5. Support
      •  
      • COVID-19
      • Employer Assistance
      • Videos
      • Contact Us
      •  
  6. Claims
      •  
      •  
Login
 
 
American Fidelity Logo

What does inflation mean for your retirement income?

 

August 16, 2022

4 minute read

Category: General

Learn more about this blog article

Inflation is when the cost of goods and services increases over time. If you plan on living the same lifestyle in retirement that you do now, you'll need more money when inflation is a factor. Inflation impacts all income, including retirement savings accounts such as social security, pensions, and other retirement plans offered by your employer.

Here is a breakdown of what it means for your retirement savings.

Social Security

Social Security is a government benefit that provides financial support to retirees or the disabled. It's one of the largest sources of income for retirees but is impacted by inflation differently than other retirement plans.

A critical part of Social Security is an annual review of the inflation index. This review aims to protect beneficiaries from losses in purchasing power. The United States Social Security Administration adjusts benefits yearly based on the cost of living as measured by the CPI-W. Unfortunately, these adjustments have historically been low. This may leave people feeling as though they have lost some of their purchasing power over time.

Pensions

Some retirees will rely on their pensions as a primary source of income when they retire. A pension is guaranteed to provide you with a fixed amount for the rest of your life.

However, there are ways in which inflation can impact pensions. For example, benefits from a pension plan are typically tied to the employee's last several years' salary. Because benefits may be based on pre-inflation salaries, a retiree's benefits could be negatively impacted if high inflation occurs during their recent years of work.

In addition, inflation adjustments may or may not be included in your pension benefits. If your pension updates for inflation, corrections will be made regularly throughout your retirement. If your pension does not adjust for inflation, you will need to make up the difference on your own.

401(k) Plans

Inflation may impact your 401(k) account too in a variety of ways, impacting the value of current investments, reducing the purchasing power of current savings or income payments, or both. The purchasing power of your money shrinks when inflation rises, meaning your dollars don't go as far. Therefore, extended periods of inflation can mean you get less for your savings.

Learn the importance of investing in your 401(k) 

Some things you can do to help protect your 401(k) against inflation include:

  • Maintain contributions: When we are in an inflationary market, and your paychecks don't go as far, reducing contributions to your 401(k) may be appealing. But contributing to your retirement fund is essential, especially if you have access to an employer match.
  • Diversify investments: Broadening your portfolio may help you get returns from a mix of investments and protect against losses in any single asset class. Diversifying during periods of high price inflation, may help you manage your exposure to potential losses.
  • Supplement your 401(k) savings: You may want to consider opening an Individual Retirement Account (IRA) or consider an annuity to grow your portfolio when inflation is a concern.

The best way to soften the blow from inflation, is to educate yourself on different options to customize your retirement plan. Learn more about annuities, Individual Retirement Accounts (IRAs), using a Health Savings Account (HSA), and buying life insurance plans to help supplement your retirement savings.

 

This blog is up to date as of July 2022 and has not been updated for changes in the law, administration or current events.

 
  • Tags:
  • General
  • Retirement
  • Education

Share:

 

Related General Articles

 
General

The importance of investing in your 401(k)

4 minute read

June 21, 2022

It's important to understand the benefits of a 401(k) and how it can positively affect your future, and your overall financial well-being.

  • Tags:
  • General
  • Retirement
  • Education
General

Are you focusing on financial independence?

3 minute read

March 15, 2022

Start creating a plan to become financially independent now, so that you can obtain financial freedom in your future.

  • Tags:
  • General
  • Retirement
Supplemental Benefits

It’s Never Too Early to Consider Purchasing Life Insurance

3 minute read

August 17, 2021

Buying life insurance early offers a chance to enjoy lower premiums and more years of protection.

  • Tags:
  • General
  • Life
 

This information is intended to be educational. It is general in nature and should not be considered financial or legal tax advice. Consult an attorney or a tax professional regarding your specific situation.

AF-1009-0722

American Fidelity Assurance Company
americanfidelity.com

https://americanfidelity.com/blog/general/inflation-retirement-income/

Site Map

About Us

News Center

Careers

Contact Us

© 2022 American Fidelity Assurance Company

  • Privacy Notices |
  • Report Fraud |
  • Terms of Service |
  • Licensing |
  • Special Notices |
  • Cameron Enterprises

This information is intended to be educational. It is general in nature and should not be considered financial or legal tax advice. Consult an attorney or a tax professional regarding your specific situation.

AF-1009-0722

  • File a Claim
    Login
  • Home
  • Benefits Strategy
    • Employee Benefits
    • Communication and Education
    • Enrollment and Admin
    • HR Assistance
    • Tax Savings
    • Compliance Updates
  • Products
    • Benefits
    • Dependent Verification
    • HR Technology
    • Reimbursement Accounts
    • Retirement Savings
    • Section 125
  • Why Us
    • For Education
    • For the Public Sector
    • For Automotive
    • Account Managers
    • Customer Testimonials
  • Blog
    • Benefits Strategy
    • Reimbursement Accounts
    • Supplemental Benefits
    • Customer Stories
    • Compliance Updates
  • Support
    • COVID-19
    • Employer Assistance
    • Videos
    • Contact Us
  • Claims
  • Careers
    • Corporate Careers
    • Sales Careers
  • About Us
  • Site Map

Popular Topics:
  • Register for an Account
  • Forms
  • Unused FSA Funds
  • HCFSA Eligible Expenses
  • Carryovers, grace periods and runoff periods
  • HSA Eligible Expenses
  • HSA Tax Forms
  • Disability Tax Forms