Barrister Brief – Geopolitics, Private Credit & Portfolios
Key Takeaways:
- Inflation is a slow, steady threat to a long retirement. Even a low rate chips away at what your money buys every year, and over 25 or 30 years, that adds up to a lot.
- Playing it too safe can make inflation worse. Money that isn’t growing loses ground to rising prices, so a retirement plan needs some growth, not only stability.
- Build inflation into your plan on purpose. Sensible inflation assumptions, a mix of growth and stability, and flexible spending are what keep rising prices from derailing your retirement.
Inflation cooled to about 2.7% in 2025, according to the U.S. Bureau of Labor Statistics.1 That sounds small, but it never stops. Over a long retirement, even a modest rate adds up: at 2.7% a year, prices roughly double in about 27 years, so a dollar early in retirement may buy only about 50 cents’ worth near the end.
For retirees, that slow erosion is one of the biggest long-term risks, because your savings have to stretch across decades of rising prices. Planning for it, rather than hoping it stays low, is what keeps it manageable.
What Rising Prices Actually Change in Retirement
While you’re working, raises usually keep pace with rising prices, so inflation barely registers. In retirement, that cushion is gone. Much of your income, like some pensions and annuities, may not rise at all, so inflation hits harder.
The bigger danger is time. A 30-year retirement means 30 years of prices creeping up. Something that costs $50,000 a year today could cost close to $100,000 a year three decades from now at a normal inflation rate. Your savings and income have to keep up with that, or your lifestyle slowly shrinks.
Inflation also hits some costs harder than others. Health care, which retirees use more of, tends to rise faster than prices overall, so your personal inflation rate can be higher than the headline number.
What Inflation Rate to Use for Retirement Planning
Most plans assume a long-run inflation rate of around 3% a year, roughly the historical average. That’s a reasonable starting point, but treating it as a single fixed number can hide two problems.
Different Expenses Rise at Different Speeds
A single inflation rate assumes everything you buy rises at the same pace, but it doesn’t. Health care and long-term care usually climb faster than average, while some costs, like a paid-off mortgage, don’t rise at all.
This matters because retirees spend differently than the average person. Medical prices rose 3.2% in 2025, and hospital services rose 6.7%, both faster than overall inflation.1 Since health care takes up a growing share of spending as you age, your own inflation rate may run higher than the official one. A good plan accounts for that.
Test Your Plan Against Higher Inflation
Inflation doesn’t stay at its average. Some years are calm; others spike, like the jump many people felt after 2020. A plan that only works at 3% inflation is fragile if prices run hotter for a stretch.
Stress-testing fixes this. Run your plan against a worst case, say 4% or 5% inflation for several years, and see whether it still holds up. If a higher rate would break the plan, it’s better to find out now, while you can adjust, than to discover it in the middle of retirement.
How to Protect Your Retirement Plan From Inflation
You can’t stop inflation, but you can build a plan that stands up to it. Two moves do most of the work.
Keep Some Money Growing, Not Just Sitting
The safest-feeling choice, keeping everything in cash and bonds, is often the riskiest against inflation. Money that isn’t growing loses buying power every year prices rise. Over decades, that slow loss can be as damaging as a market crash.
The fix is balance. Keep enough in stable, lower-risk investments to cover your near-term spending, so a downturn doesn’t force you to sell at a bad time. But keep a meaningful share invested for growth, mostly in stocks, since that growth is what stays ahead of rising prices over a long retirement.
Build Flexibility Into Your Spending
A rigid withdrawal plan, taking the same amount every year no matter what, leaves you exposed. Building in some give makes your plan far more durable.
In years when inflation or the market runs against you, trimming spending a little, delaying a big purchase, or skipping a raise for yourself can protect your savings. Some retirees also lean on income that rises with inflation, like Social Security, or investments built to keep pace. A little flexibility each year goes a long way over a 30-year retirement.
Inflation and Your Retirement FAQs
1. How much should retirees worry about inflation?
Enough to plan for it, but not to panic. Inflation is one of the biggest long-term risks in retirement because it works slowly over decades, but it’s also very manageable with the right plan. The retirees who struggle are usually the ones who ignored it, kept everything in cash, or assumed prices would stay flat.
2. How do you protect your retirement from inflation?
Keep part of your money invested for growth, since that’s what outpaces rising prices over time. Hold enough stable money to cover near-term needs so you’re not forced to sell during a downturn. Build flexibility into your spending, and lean on income that rises with inflation, like Social Security. No single move solves it; the mix does.
3. What inflation rate should you use for retirement planning?
A long-run rate of around 3% a year is a common starting point, close to the historical average. But it’s smart to plan for your own costs, especially health care, which often rises faster, and to stress-test your plan against higher rates like 4% or 5%. Using one flat number can leave you underprepared.
4. Does Social Security keep up with inflation in retirement?
Partly. Social Security includes a yearly cost-of-living adjustment, or COLA, that raises your benefit based on inflation.2 That’s a genuine advantage most pensions don’t have. But the COLA uses a broad price index that may not match a retiree’s actual costs, especially health care, so it doesn’t always keep up dollar for dollar.
5. Why can a very conservative retirement portfolio make inflation risk worse?
Because money that isn’t growing steadily loses ground to rising prices. Cash and bonds feel safe, but if they earn less than the inflation rate, your buying power shrinks a little every year. Over a long retirement, that slow erosion can do more damage than a market drop, which is why even cautious retirees usually need some growth.
6. How often should you update inflation assumptions in your retirement plan?
Review them at least once a year, and any time inflation shifts sharply or your spending changes. You don’t need to react to every monthly number, but checking that your plan still works under current conditions, and stress-testing it now and then, keeps rising prices from catching you off guard.
Get Help Building an Inflation-Ready Retirement Plan
Inflation is one of the few retirement risks that’s almost certain to show up; the only question is how much. Left unplanned, it slowly shrinks what your money buys over the years. Planned for, with the right assumptions, a mix of growth and stability, and flexible spending, it’s a risk you can manage.
That’s the work our team at Barrister does with clients. We can build inflation into your plan from the start, set realistic assumptions for your own costs, balance growth against stability, and stress-test the whole thing against higher-than-expected prices.
We can also revisit it over time, so your plan keeps up as prices and your life change. If you’d like a retirement plan built to stand up to inflation, schedule a complimentary consultation with our team.
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09/24/2026
