Higher Rate of Inflation During Retirement

Inflation is a major concern during retirement. In fact inflation for older Americans is considerably higher than it is for the rest of the population since the cost of food is rising by 5.7% a year, home energy is up 5.5%, gasoline is up 34%. It costs 8.9% more to fly than it did a year ago. Medical services are rising by 5.7% a year, hospital services by 8.5%, home health-care and nursing-home fees by 4.5%. Funerals are up 4.8%.

Falling house prices, while deflationary, actually hurt seniors as well. Many of those heading into retirement are, effectively, net sellers of real estate. Empty nesters often hope to cash out of their big family homes and move to something smaller, pocketing the difference. Via reverse mortgages, many also may want to tap into their homes' values in the years ahead.

If "senior" inflation continues to run well ahead of general inflation, it could raise two extra problems, even for those who are a long way from retirement. The first is that tens of millions of Americans may be in even worse shape financially than they realize. The second risk is that as the population ages, this "senior" inflation figure will become closer and closer to the norm.

What this means is that it is more important than ever to have adequate savings for retirement. It seems paradoxical that during retirement, when you on a fixed income that you would experience the highest rate of inflation. Social Security benefits only increase at the average rate of inflation, which is below the true rate of inflation in retirement. Prepare for the shortfall now!!!!