Although inflation levels have dropped modestly over the past few months, living costs are still sky-high across the board. And consumers across a range of ages have been struggling to keep up.
Some workers, however, are now rethinking their retirement plans because of rampant inflation. Nationwide reports that 38% of women are currently reconsidering their plans due to the cost of living, while 26% of men are doing the same.
If you're getting close to retirement, you may be wondering if it pays to put off that milestone and wait for living costs to come down. The answer? It depends on your full financial picture.
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You may be able to proceed -- but with caution
Retiring in the near term may be feasible for you even if inflation levels remain high. But whether that's the case will largely hinge on the income sources you have at your disposal.
If you plan to get the bulk of your retirement income from Social Security, then retiring in the near term may not be the best move. Sure, Social Security benefits are getting a very generous 8.7% raise in 2023, but that still doesn't mean they'll suffice in allowing you to cover your bills. This actually holds true for Social Security even outside of periods of rampant inflation.
On the other hand, if Social Security is just one of several income sources you expect to have available in retirement, then you may be able to wrap up your career in the near term as planned and simply adjust your spending plans to be more cautious. So, let's say that on top of your monthly Social Security benefit, you have a $1.5 million IRA or 401(k) plan you can withdraw from, and that you have the option to rent out your finished basement for $900 a month. That paints a pretty decent picture.
Of course, right now, a lot of retirement plan balances are down, so you may need to limit your IRA or 401(k) withdrawals if you retire in the near term. But if you have enough financial wiggle room to allow for that, then retirement may be doable even if it seems like there are many different factors working against you and prompting you to put that milestone off.
What sacrifices do you want to make?
Higher living costs could make it so you're not able to enjoy retirement the way you always imagined. In that case, retiring soon may not be worth it.
But if you're ready to wrap up your career and are in a strong place financially, then inflation doesn't necessarily have to be the factor that ruins your plans or forces you to postpone them indefinitely. If you're able to make some lifestyle adjustments to account for higher living costs, you may find that you're able to stick to your retirement plans without adding undue financial stress to your life. And that way, you can begin to enjoy the freedom of not having a job to go to day in, day out.
