If it seems like the cost of, well, everything has gone up lately, it’s true.

The inflation rate jumped in the first half of 2021, leading to price increases on everything from gas and groceries to bigger ticket items such as cars and homes.
The jump in inflation can be especially jarring after nearly a decade of steady, low rates.¹  But what causes fluctuations in the inflation rate?

And most importantly, could rising prices pose a risk to your plan for retirement?

This topic is showing up more often in news stories which can cause anxiety. As with all financial decisions, it's important that we gather information and think logically about how inflation could impact our future plans

Today we'll explore some of the common questions about inflation. We’ll also look at how to think about inflation as you plan for a retirement that could span 20, 30 or even 40 years.

Cola and Social Security.

The news keeps getting better for Social Security recipients.

It's now projected that benefits will increase 6.1% in 2022, up from the 4.7% forecast just two months ago. That would be the most significant increase since 1983.^1,2

It’s all about inflation. Social Security cost of living adjustments (COLA) are based on the consumer price index, which rose 5.4% in June — its largest 12-month increase since 2008. The official announcement is expected in October and, once it’s confirmed, the revised payment will go into effect in January 2022.³

More than 65 million Americans receive Social Security, and the annual cost of living adjustments are designed to help recipients manage higher costs. At the start of 2021, recipients saw a 1.3% increase.⁴

There are compelling reasons to adopt a wait-and-see approach.

Inflation can be a scary word for people who are retired. It’s code for “prices are going up, but my income may stay the same.”

The most recent reading on consumer prices put inflation back into the conversation. The Consumer Price Index (CPI) rose 0.8% in April 2021 and jumped by a greater-than-expected 4.2% year-over-year.¹

How much inflation can we handle before we're in trouble? Let's discuss. . . 

First, let’s get on the same page about some basics. If you’ve noticed the price of a thing increasing over time (say, your favorite candy bar or the cost of college tuition), that’s inflation in action. Economists use the broad increase (or decrease) in prices of goods and services across the country as a measure of economic health. When inflation is stable and predictable, it’s a sign of a basically healthy, growing economy.