Many financial retirement articles include the mention of inflation. Many talk about how inflation can eat away at your retirement nest egg if you are not careful. If you are withdrawing the recommended 3-4% per year from your savings you will most likely be fine unless inflation takes a nasty turn for the worst. Today's inflation of 8.3% or so is high compared to recent history. We have enjoyed inflation rates of 3% or less for years and years. Now, this jump in inflation is alarming to all! The cost of everything is rising. We hear nightly about the rise in gas prices. Just this morning, the Today show was reporting to expect an average of $6 per gallon by Labor Day! But, I'm seeing pretty big increases at the grocery store also. The last time we bought groceries, I was shocked at how much I paid for a few sacks of groceries. Everything had gone up. Bacon was high as well as everything else we put in our shopping cart. My wife was shocked that a bag of Fritos was over $5! We have also noticed that even if the prices haven't changed, the amount you receive of the product has decreased.
A side affect of the inflation is the Feds increasing interest rates to fight the problem. On top of inflation, the higher rates make it costlier if you finance anything. This increase has already had an impact on mortgage rates and the slowing down of the housing market. I heard the other day that you have to pay sticker or over sticker price on new vehicles due to the shortages. Now, you have to add on a higher interest rate if you finance it. The interest rates don't affect a lot of retirees, as you tend to borrow less and you have may have been settled into your house and interest rate for awhile.
As prices increase, the income of a retired person may very well not increase to match. That is a problem. I remember in my working days, a little inflation was balanced by a cost of living increase in my salary. I'm not so sure that equals out as well in my retirement years. Any cost of living increase from my 401K withdrawal must be given by myself. As the stock market has stumbled, I'm not sure I'm comfortable with giving myself an 8% cost of living raise. I have seen inflation in two spots, gas and groceries. I've also noticed a little increase in prices at restaurants. Where are you seeing the inflation raise it's head?
We all have seen the gas prices increase and feel the pinch. Have you seen other everyday items increase? How are you dealing with inflation in your household? Are you giving yourself a raise to match prices? Or, are you cutting expenses to deal with the increase in the cost of everyday items?