4 ways to fight inflation in your financial strategy

You can take steps to help you deal with inflation in the future

Inflation is the hot topic right now. And for a good reason – we are experiencing inflation at 40-year highs.

Inflation is up more than 7.7% in the last 12 months, according to the Bureau of Labor Statistics. To put that into perspective, the average rate of inflation since 1922 has been 2.8%.

Many Americans are concerned about how inflation will affect their financial futures.

The vast majority of Americans (80%) said they worry about rising inflation continuing to have a negative impact on the purchasing power of their income in the next six months, according to the 2022 3Q Quarterly Market Perceptions Study* from Allianz Life Insurance Company of North America (Allianz Life). And 75% said they worry the rising cost of living will affect their retirement plans.

54%
of Americans said they have stopped or reduced retirement savings due to inflation
43%
said they have had to dip into their retirement savings because of rising inflation
61%
said they worry that if they don’t increase their retirement savings soon, it will be too late to have a comfortable retirement

You can take steps to help you deal with inflation in the future.

Steps to help you deal with rising cost of living

1

Learn how inflation affects retirement expenses

At a modest rate of inflation, costs could double in about 28 years. But, right now, we’re experiencing rates far higher than a modest 2.5%. That means prices will double even sooner.  Understanding the effect of inflation is particularly critical after you have retired and are no longer earning new income. The longer you live in retirement, the more inflation presents a risk.

A good place to start is determining your potential retirement expenses and consider how inflation would affect your consumption basket.

2

Review your retirement income sources

Financial strategies for retirement often include a combination of income sources to pay for expenses after leaving the workforce. This could include Social Security, savings in an employer-sponsored plan like a 401(k), an IRA, and annuities, among other sources.

Some of those income sources will adjust for increased cost of living or have increasing income opportunities. For example, Social Security benefits increase to keep pace with inflation. The latest cost-of-living adjustment for Social Security will increase benefits by 8.7% beginning with January 2023 payments, according to the Social Security Administration. Other sources may not have the ability to increase with inflation and should be considered.

3

Your total rate of return

High inflation rates are often coupled with low interest rates. This combination could result in your total rate of return being different than originally anticipated.

Be realistic when you plan for your retirement income. Over a long retirement, there will be years where your returns are high and when they are low.

4

Work with a financial professional

A financial professional can help explain inflation-fighting strategies and help select which ones may be most effective for you. A financial professional may suggest products like annuities with income riders either built in or at an additional cost that can help address the risk of inflation and rising health care costs during retirement.

InformationInformation

Learn about fighting inflation

This video helps explain how health care costs, inflation, and taxes may affect your retirement — and how annuities could help you address those concerns.

The potential for these features to help address inflation is not guaranteed and is dependent on a variety of factors.

Annuities can help you meet your long-term retirement goals by offering tax-deferred growth potential, a death benefit during the accumulation phase, and a guaranteed stream of income at retirement.

*Allianz Life conducted an online survey, the 2022 3Q Quarterly Market Perceptions Study in September 2022 with a nationally representative sample of 1,004 respondents age 18+.

Products are issued by Allianz Life Insurance Company of North America. Registered index-linked annuities are distributed by its affiliate, Allianz Life Financial Services, LLC, member FINRA, 5701 Golden Hills Drive, Minneapolis, MN 55416-1297.

Guarantees are backed by the financial strength and claims-paying ability of Allianz Life Insurance Company of North America. Variable annuity guarantees do not apply to the performance of the variable subaccounts, which will fluctuate with market conditions.