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• April 2026 Inflation Breakdown
• BLS Report
• The Hidden Risk of High Yield Cash in Retirement
• What Are TIPS and Why Can They Lose Money When Inflation Spikes
• Social Security’s COLA: Let’s Not Mess with the Index
• How Sequence-Of-Inflation Risk Impacts Retirees Beyond Just Sequences of Returns
• Is Inflation Another Form of Sequencing Risk?

When inflation makes headlines, most retirement savers feel like there’s not much they can do about it.

Saving enough, investing well, lowering taxes, and building income — those feel like parts of the plan you can control. But rising prices can feel different. They can feel like something that simply happens to you.

But here’s the important part: the inflation number you see in the news is almost never your inflation number. Two retirees can live through the same inflation environment and face very different levels of risk. And the gap between them often comes down to a handful of things they actually can control.

So, in this episode, I’m simplifying how to think about inflation as a retirement saver. I’ll walk you through three questions that, taken together, can help reveal how exposed your plan really is.

You’ll see why the same headline inflation number can overstate the risk for one retiree and underestimate it for another. And more importantly, you’ll learn the specific levers you can pull to help defend your plan, no matter which side of that line you fall on.

Welcome to another episode of the Stay Wealthy Retirement Show. I’m your host, Taylor Schulte, and every week I cover the most important financial topics to help you stay wealthy in retirement. Ok, onto today’s episode.

Why the Same Inflation Can Hit Two Retirees So Differently

Consider two retirees who live a few blocks apart in the same town.

Both retired last year. Both have about $2 million saved. And both saw the same headlines this spring saying inflation had risen to 3.8% — the highest reading in nearly three years.

On paper, they’re facing the same inflation rate, but their day-to-day experience may be very different.

One retiree might barely notice the change because a large portion of her spending is fixed, flexible, or covered by income sources that adjust with inflation.

The other may feel the pressure more directly because more of his budget is tied to categories that have been rising faster — things like energy, travel, groceries, insurance, or home maintenance.

That’s the problem with relying too heavily on the headline inflation rate you read about or hear about in the news. It gives us a useful starting point, but it doesn’t tell us how inflation is actually showing up inside a retiree’s personal spending plan.

First, a little backdrop on that number. For the one-year period through April 2026, the Consumer Price Index rose 3.8%. So, from April 2025 to April 2026, prices for consumer goods and services rose slightly less than 4%. That’s much better than the 9.1% figure we experienced in 2022, but it’s the fastest pace in almost three years, and it’s still well above the Federal Reserve’s 2% target.

Most of the recent pressure has come from energy, especially fuel prices, as the conflict overseas has pushed oil higher and flowed through to gas, airfare, and even parts of the grocery bill.

All that to say, inflation is back in the conversation, and for retirees, the concern is understandable.

When you’re still in the working world, wage growth can help offset rising prices. But even that cushion has been thin recently. Over this same one-year stretch through April 2026, the average paycheck grew about 3.6%, which means the typical worker’s inflation-adjusted pay slipped slightly.

And for retirees, the math can feel even tighter. Yes, Social Security does provide an annual cost-of-living adjustment, which can help combat rising prices. But portfolio withdrawals from investment and retirement accounts aren’t guaranteed to rise with inflation each year. So when withdrawals need to increase to keep up with higher prices, the added pressure lands squarely on your nest egg.

And this is where inflation planning needs to get more personal. The headline number matters, but three other questions matter more:

1. How much of your spending is actually exposed to inflation?
2. How much of your income adjusts when prices rise?
3. And when does inflation show up relative to your retirement date?

Those three questions can turn inflation from a broad concern into something you can measure, stress-test, and plan around.

Let’s go ahead walk through each one, starting with question #1: what is your personal inflation rate?

Question 1: What Is Your Personal Inflation Rate?

And to answer this, it’s helpful to start with understanding the headline number itself.

In short, when the government calculates the Consumer Price Index, or CPI, it’s measuring price changes across a broad basket of goods and services designed to represent the average consumer.

That basket is useful, but it’s not personal or unique to your situation.

For example, housing carries the largest weight, at roughly 44%. Food is around 15%. And then you have transportation, healthcare, recreation, apparel, and other categories, each with a smaller share of the pie.

One way to think about this is like a national weather report. A national weather report might tell you the country’s average temp will be 60 degrees today, and while that may be accurate, it’s not very helpful when you’re deciding what to wear in your zip code. For that, you would obviously need the local forecast.

The Consumer Price Index works the same way. The national inflation number gives us a broad picture of what’s happening across the united states economy, but it doesn’t tell you how rising prices are showing up in your household and your actual retirement spending plan.

Go back to the first retiree from our example. Her mortgage is paid off. Her spending is fairly modest. She’s in good health. And her largest discretionary expense is a couple of nice trips each year.

For this retiree, the biggest category in the national inflation basket — housing — may not have much impact on her actual spending. She still has property taxes, insurance, maintenance, and utilities, of course. But the largest housing cost for many households, the monthly mortgage or rent payment, is no longer part of her budget.

So even if housing is contributing meaningfully to the national inflation number, it may not be driving her personal inflation rate in the same way.

Now consider the second retiree.

He’s paying a high health insurance premium in the years before Medicare begins. He’s helping an aging parent with care costs. And he’s driving more than usual to provide that help, right as fuel prices are rising.

His spending is concentrated in categories that may be climbing faster than the headline number. So while the national inflation rate may be 3.8%, his personal inflation rate could be meaningfully higher, which means the headline number doesn’t capture how inflation is landing in his actual life.

And this is common in retirement planning. Retiree budgets and expense projections often look different from the national basket. They may be lighter on categories like apparel, commuting, and childcare, and heavier on healthcare, insurance, travel, home maintenance, and services. And some of those categories, as you may be all too familiar with, have a history of rising faster than the broad inflation rate.

Now, that doesn’t make CPI useless, it just means CPI is a starting point, not a  complete and accurate retirement planning number for your situation.

So if inflation is a concern, or if you’ve determined it’s one of the more important assumptions in your plan, a practical next step is to estimate your own personal inflation rate.

And you don’t necessarily need to overcomplicate it to get started. You might open a simple spreadsheet, or grab a pen and paper, and list your major spending categories: housing, food, healthcare, transportation, travel, insurance, taxes, gifts, hobbies, and anything else that makes up a meaningful part of your budget.

Then write down approximately what you spend in each category.

From there, apply a reasonable inflation estimate to each category and weight it based on how much of your budget it represents.

The result won’t be perfect, but it will be far more useful than relying only on the headline number.

And once you have something that is a little more unique to your situation, you can plan around it.

For example, if a large share of your spending sits in categories rising faster than average, your plan may need more inflation protection, which we’ll talk about momentarily. On the other hand, if most of your spending is fixed or tied to slower-moving categories, you may be more insulated than the headlines suggest.

Either way, this simple step can help take a broad concern and turn it into something measurable. And in retirement planning, measurable is much easier to manage.

Question 2: How Much of Your Income Already Keeps Up With Inflation?

Now, once you have a clearer sense of your personal inflation rate, the second question turns to income.

Specifically, the question asks: how much of your retirement income will automatically increase as prices rise? And how much will remain fixed, paying you the same number of dollars even as each dollar gradually buys less?

For example, some retirement income does come with inflation protection built in – the clearest example being Social Security, which usually receives an annual cost-of-living adjustment. And I say “usually” because since automatic COLAs began in 1975, there have actually been three years when benefits didn’t increase at all: 2010, 2011, and 2016.

The good news is that Social Security COLAs are floored at 0%, meaning benefits don’t decline when inflation is flat or negative. They simply just don’t increase.

In addition to social security, some pensions also include cost-of-living adjustments to annual payments. A handful are quite generous, others are capped or only adjust under certain conditions, and there are an increasing number that simply don’t offer COLAs anymore. So if you have a pension, it’s worth understanding exactly how that adjustment will work for you in retirement.

Certain annuities may also include a fixed annual increase. For example, the payment might rise by a set percentage each year, which can certainly help, but it won’t track actual inflation perfectly. If inflation is lower than the fixed increase, you may come out ahead. If inflation is higher, your purchasing power can still fall behind.

And it’s worth noting that true CPI-linked annuities are generally no longer available in the retail market. So while some annuity payments can increase over time, they usually don’t adjust directly with the Consumer Price Index.

Lastly, there’s your portfolio. And this is where much of the inflation planning work happens, because portfolio withdrawals usually don’t come with an automatic raise unless the plan is designed that way.

On the investment side, two tools are specifically built to directly combat inflation: Treasury Inflation-Protected Securities, or TIPS, and I bonds. I-bonds are purchased through Treasury Direct and TIPS can be purchased individually through your custodian of choice or through an index or mutual fund specifically designed to provide broad exposure to treasury inflation protected securities.

Beyond TIPS and I bonds, global stocks can also play an important role in protecting against inflation. But they work very differently than Social Security or an annuity with an inflation rider.

In any given year — especially during a sharp inflation spike — stocks can be incredibly inconsistent. Sometimes they keep up. Sometimes they don’t. And sometimes they perform poorly at exactly the moment inflation feels most painful.

But over longer periods of time, the picture changes significantly. Since the late 1920s, inflation has averaged roughly 3% per year, while stocks have returned closer to 10% per year in nominal terms.

So, while stocks are not a reliable short-term inflation hedge, historically, they have been one of the best, if not, the best long-term defense against inflation.

On the other end of the spectrum are cash and traditional bonds. These generally provide returns that are stated in nominal dollars and don’t automatically adjust for inflation, making them more vulnerable when inflation is running high.

As an example, a 4% yield on cash can feel attractive, especially after years of earning next to nothing. But if inflation is running at 3.8%, your real return, your return after inflation is factored in, is nearly zero. In other words, your account balance may be growing, but your purchasing power is hardly moving.

And this isn’t unique to the current environment. Over the last 100 years, cash has returned roughly 3% per year, about the same as the long-term average for inflation. So, over long periods of time, cash has done a decent job preserving purchasing power, but it has not done much to grow it.

Now, that doesn’t mean cash and bonds should be avoided. In retirement, especially, they serve an important purpose. These asset classes provide stability, liquidity, and a source of funds you can draw from when stocks are down.

The key is finding the right balance. If you hold too little in safe assets, you may be forced to sell stocks during a downturn. If you hold too much, inflation can slowly eat away at your future spending power.

So, coming back to where we started, the question isn’t just, “How much income do you have in retirement?”

The better question is, “How much of that income can (and will) keep up when prices rise?”

Social Security, pensions with cost-of-living adjustments, TIPS, I bonds, certain annuities, stocks, bonds, and cash all respond to inflation differently. And once you understand how each piece behaves, you can start to see whether your retirement plan has enough inflation protection built in — or whether too much of your income is fixed in place while your expenses continue to move.

Question 3: Where Are You in Your Retirement?

Ok, our third and final question focuses on timing. Specifically, “where does inflation show up on your retirement timeline?”

And this is important because higher than normal inflation early in retirement can have a long-lasting effect. If prices jump in the first few years after you stop working, your baseline spending needs may move higher right away, and once that higher baseline is established, future increases build from there.

Sure, prices can come down in specific areas, but broad, sustained deflation is rare. So when inflation arrives early, it can put pressure on the plan at the very point when the retirement timeline is longest.

This is closely related to something I’ve covered many times before on the show: and that is sequence-of-returns risk.  Friend, professor, and retirement specialist, Jamie Hopkins, among many others, has made this point — high inflation early in retirement, more or less, acts like another form of sequence risk.

The same way poor market returns early in retirement can be more damaging than the same returns later, high inflation early in retirement can be more damaging than high inflation later. The issue isn’t just the size of the increase, it’s the timing of when it happens.

A couple of episodes ago, I shared the example of two retirees with nearly identical plans. Each started with a one-million-dollar portfolio, the same investment allocation, the same withdrawal rate, and the same 30-year time horizon. The only difference was the two-year period in which they retired. One finished with about $280,000, and the other finished with more than $3 million.

The plan was the exact same, but the environment was different.

Inflation works in a similar way. The market and inflation environment you retire into can have a meaningful impact on the path your plan follows, especially in the first several years of retirement.

Morningstar’s retirement-spending research has found something similar. Retirees who started retirement just as a period of unusually high inflation began had a harder time sustaining spending over a full 30-year retirement.

While helpful and interesting, all of this needs to be kept in context. Retiring into high inflation does not automatically mean a plan fails. There have been plenty of historical periods where a properly built investment portfolio more than helped to offset the pressure from rising costs.

The real challenge is that you don’t know ahead of time which kind of environment you’re retiring into. And that’s why flexibility matters so much.

If inflation flares up early in retirement, the ability to make modest spending adjustments can be extremely valuable. Maybe you don’t take the full cost-of-living increase on your portfolio withdrawals that year. Maybe you hold spending flat for a period of time. Maybe you trim a few discretionary expenses or delay a larger trip by 6 or 12 months. None of those adjustments need to be permanent, but when they happen early, they can help preserve the foundation of the plan.

This is the basic idea behind dynamic withdrawal strategies: they give you an evidence-based framework for making thoughtful spending adjustments as market conditions change. And, at the risk of sounding like a broken record, what I appreciate most about these strategies is that they don’t require you to predict the future. Instead, they give you a stress-tested, systematic process for responding to it.

If markets are struggling, inflation is elevated, or your plan is under pressure, you have a disciplined way to make adjustments. And when conditions improve, you have a framework for increasing spending again with confidence.

That’s especially important with inflation, because similar to the financial markets, the goal isn’t to forecast it perfectly. The goal is to build a retirement income plan with enough flexibility, inflation protection, and guardrails to help you adapt when rising prices show up at the wrong time.

The Bottom Line

Put simply, a good retirement plan is not built on the assumption that prices will behave, markets will cooperate, or every year will look like the long-term average. It’s built with the understanding that uncomfortable periods will happen, and that the plan needs to be prepared for them before they arrive.

And that is especially true with inflation. Rising prices are frustrating because they touch almost every part of daily life. You see them at the grocery store, in your insurance premiums, on your utility bill, and every time a familiar expense suddenly costs more than it used to. But from a planning perspective, inflation becomes less intimidating when it is no longer treated as one big, abstract threat.

The more useful approach is to ask how exposed your plan really is, where protection already exists, and what choices you would have if inflation became more persistent than expected. Because in retirement, confidence does not come from knowing exactly what will happen next, it comes from having a plan that gives you room to respond.

Room to adjust spending without panic. Room to draw from the right assets at the right time. Room to let long-term investments do their job. And room to make thoughtful changes without feeling like every headline requires a complete overhaul.

I hate to break it to you, but inflation will always be part of retirement planning. The goal is not to eliminate it, and it is certainly not to forecast it perfectly. The goal is to make sure your plan has enough structure, flexibility, and inflation protection to keep rising prices from quietly taking control of your decisions.

Thank you, as always, for listening. To view the research and resources for this episode, head over to youstaywealthy.com/286.

Disclaimer

This podcast is for informational and entertainment purposes only, and should not be relied upon as a basis for investment decisions. This podcast is not engaged in rendering legal, financial, or other professional services.