A shopper at a grocery store in San Francisco on May 2, 2022.
David Paul Morris | Bloomberg | Getty Images
Inflation is a growing concern as Americans spend hundreds more every month. But some retirees can avoid the sting of rising prices for gas, groceries and other costs.
Annual inflation rose 8.3% in April, nearing a 40-year high, according to the US Department of Labor.
More than half of Americans expect rising spending to have a “significant negative impact” on long-term financial goals, such as a comfortable retirement.
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But spending shifts throughout people’s golden years can lessen the impact of some rising costs, according to JP Morgan’s Guide to Retirement 2022.
“It’s getting below the headlines,” said Katherine Roy, chief retirement strategist at JP Morgan, explaining how the basket of assets retirees buy can change over time.
Although gasoline prices hit a new high this week, older households tend to spend less on transportation than families aged 35 to 44, making them less vulnerable, the report said.
And some retirees may have the option of buying less gas by combining trips or sharing rides, said certified financial planner Catherine Valega, a wealth consultant with Green Bee Advisory in the greater Boston area.
“I don’t think we need to panic,” added Valega, explaining how price changes can be a chance to revise budgets and long-term plans.
While JP Morgan suggests using a separate line item for rising healthcare costs, with a growth rate of 6%, other expense categories can only inflate by 1.5% to 2% per year , said Roy.
If you take out health care, retirees tend to spend less in real terms until age 80 in other categories, she said.
These results are consistent with a SmartAsset analysis showing a decrease in retirement spending in 11 of the 14 major categories found in the US Bureau of Labor Statistics’ Consumer Expenditure Survey.
While rising health care costs are concerning, they are not enough to offset retirees’ falling spending on housing, food and transportation, said CFP Anthony Watson, founder and president of Thrive Retirement Specialists. in Dearborn, Michigan.
“For the majority of people, these other expenses go down over time,” he said.
Of course, rising costs may currently be more difficult for lower-income households, which tend to experience higher rates of inflation, according to a National Bureau of Economic Research working paper.
However, it is important for retirees to have a long-term outlook on inflation, according to the JP Morgan report.
“It’s just a point in time and what matters is the average,” Watson said.
“Yeah, we’re having high inflation right now,” Roy added. “But we have come out of a historically low period for a very long time.”