Halfway through a long, rocky hike in the Great Smoky Mountains, I realized I was in over my head. Underprepared and overwhelmed, I felt done. Whether pushing ahead or turning back, I had 7 miles to travel. Just as I was questioning my life choices, my son suggested we call the park ranger station or even 911.
“Wow. What would that look like?” I thought. “Was I really in that bad of shape?” As tempting as a tap-out sounded, I was able to get by with an extra Gatorade and an energy bar instead of a rescue helicopter and an IV hookup. Six hours later, legs battered, ego bruised, I finished the hike in the dark.
We all face moments of self-doubt and indecision. Sometimes we reset and sometimes we retreat. It’s the same on the road to retirement — some of us feel stuck and others are striving. If you’re rethinking your next planning move, don’t panic! Instead, ponder: If I retired today, what would that look like?
If I retired today, what would my cost of living look like?
This part of the picture is not ideal. When you consider how incredibly fast the inflation rate rose from a long, comfortable period of lows to today’s historic highs, pausing to evaluate current economic conditions may seem wise. In the span of just one year, the inflation rate notched its largest increase in 40 years in June with consumer prices up 9.1%. This was the biggest 12-month increase since the year that ended in November 1981, when the consumer price index reached 9.6%.
Whatever direction inflation goes from here, it’s having an impact on us all, and in some ways inflation could affect retirees more than others. What are we seeing? Higher energy prices — including a recent record high for gas — and cost increases for a broad range of other items, such as groceries, travel and shelter. What does this mean for retirement? An inflation rate of just 4% will cause the cost of everyday items to double during the course of the average 18-year retirement. At an 8% inflation rate, everyday costs could double in nine years.
If you decide to push forward with retirement, the outlook is not all bad. This year, the Social Security Administration raised benefits by 5.9%, the largest cost-of-living increase in 40 years. While that spike for retirees fell short of today’s inflation gap, there may be a 9.6% increase for Social Security beneficiaries in 2023 to make up for sky-high inflation, according to a recent projection by The Senior Citizens League, one of the nation’s largest nonpartisan senior advocacy groups.
If I retired today, what would my nest egg look like?