Retirement? 3 ways to survive runaway inflation
Here’s how older Americans can manage a higher cost of living.
- Many retirees have to limit their spending due to financial constraints.
- With inflation soaring, here are some ways retirees can buy themselves more short-term flexibility.
It’s no secret that the cost of living has skyrocketed since mid-2021 thanks to runaway inflation. While these rising costs should eventually come down, right now everything from gas to groceries to utilities is more expensive than usual.
As much as inflation can wreak havoc on workers’ budgets, it could cause a world of stress for retirees. Retirees are often limited to a fixed income — one that revolves around Social Security benefits, which don’t always pay so generously. And many retirees don’t have much wiggle room in their budget when the cost of living rises.
If you’re a retiree struggling to cope with higher costs, you’re in good company. Here are three steps you can take to survive this period of rising prices.
1. Temporarily increase your IRA or 401(k) withdrawals
It’s important to withdraw money from your retirement savings fairly conservatively so that you don’t deplete your nest egg prematurely. But given the skyrocketing cost of living, it’s not unreasonable to temporarily increase your IRA or 401(k) withdrawal rate. If you normally withdraw $400 a month from your retirement plan to supplement your Social Security income, you might consider increasing those withdrawals to $500 or $600 until the cost of living comes down.
2. Tap your home equity
If you own a home, chances are you have good equity. Home equity levels are on the rise nationally, so even if you haven’t yet managed to pay off your mortgage, you may still have the option of taking out a home equity loan and provide access to cash that you can use to cover living expenses. Although you have to repay this loan over time, home equity loan interest rates can be reasonable, making it a fairly affordable option.
3. Get a part-time job
Many people look forward to retirement so they can stop working. But if you’re struggling to make ends meet due to the rising cost of living, you may have to compromise by working a few hours a week.
The good news, however, is that working part-time doesn’t have to mean showing up at an office, store, or other physical location. There are many gigs you can do from the comfort of your home, such as writing, editing, data entry, and virtual tutoring. There are also gigs that require you to leave the house but let you set your own hours, like driving for a ride-sharing company.
Think about how much income you need to make your bills more manageable and use that to guide your decision. And who knows? You may find that you enjoy having a part-time job to keep you busy, to the point that you decide to stick with it even after the cost of living drops.
Inflation is not an easy thing to manage, especially when you are retired. But these moves could get you through this tough time until consumer prices stabilize and become more manageable for you.
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