Retirement Derailed By Inflation

Barron's had an article titled "Retirees Put Their Lives on Hold for Covid. Inflation Is Forcing Them to Do It Again." The article is mostly short profiles of retirees and how they are reacting to the higher prices of late. They are collectively spending less, cancelling travel plans, cancelling plans to move, not driving one of their cars, one lady started some sort of homemade soap business that involves her being on the "craft fair circuit." 

"Reacting" is the key word in that last paragraph. These people are portrayed as reacting to something going wrong with their retirement plans, figuring it out as they go. There wasn't much info about where these people stand in terms of how much they'd accumulated. Someone could have plenty of money and simply be worried and making changes without really being in trouble. Or they might have no margin for error and the jump in prices is a very serious problem. Either is valid, it just wasn't clear where any of them actually stood. 

This resonates with me in a big way, we talk about it all the time here. The problem to solve is not "ooh, there might be inflation one day" or some other narrow threat coming to pass. The way to think about this is what happens if I come up short, what can I do to mitigate that? I'm not sure it matters if a problem arises because of inflation, poor sequence of returns, something expensive happens, some combo of those three or something else entirely. If you're coming up short, you're coming up short.

The solution then would be bolstering income which maybe the simplest way is to figure out how to add an income stream to expected Social Security and whatever you plan to pull from savings. I mentioned the one lady selling soaps (bath bombs actually), another retiree (she may not actually be retired but her husband is) continues to work as a hair stylist. 

People don't love this idea but if you enjoy what you do, why would you give it up entirely? Scale back some if you want, sure but why willingly give it up? What do your finances look like taking Social Security, still making maybe 1/3-1/2 of what you made full time in the same gig? Does that let you avoid drawing from your savings for a while or maybe allow you to draw less than you were planning? This example assumes you get it right about not taking SS before your FRA while continuing to work. 

Playing the long game cultivating interests into potential income streams is another idea we talk about all the time. These can be volunteer gigs, hobbies, some skill you picked up along the way, there must be others we could include here too. 

I continue to believe the best chance for success on this front is to start now, to not wait until you're retired or even worse, wait until there is a problem. The longer the runway, the better the odds of success. 

We've added one piece of investment property to our mix a while back that we rent out on Airbnb. We're lucky that it is cash flow positive, it will be paid off in 10 1/2 years for more cash flow or we can sell it if we don't want to be in the short term rental business at that point. 

Everyone has their own particulars that could be cultivated into opportunities to avoid the problems the retirees profiled by Barron's appear to be having. The more effort you put in here, the more you will prevent/solve your own problem.