Budgeting Strategies for Baby Boomers During Inflationary Times

Budgeting Strategies For Baby Boomers During Inflationary Times

Rising prices have caught many baby boomers by surprise after years of favorable consumer conditions punctuated by low inflation rates. Retirees interested in maintaining an acceptable standard of living based on budgets that worked well over the past few years must adjust to the U.S. News & World Report‘s 5 to 5.5% Consumer Price Index that qualifies as the highest percentage in the previous 13 years.

Reassess Current Spending Habits

Instead of spending money spontaneously, smart consumers will spend extra time budgeting by researching where the best deals are on groceries and gas. It is easy to uncover deals online as a proven way to stretch those hard-earned dollars to get more for your money.

Take a hard look at what you’re spending every month to identify ways to manage your budget. For example, eliminating one streaming service in favor of some of the free services available makes sense. There are several streaming services that are free. Some services even offer a free trial period. Peacock, Tubi, Crackle, Pluto TV, and Vudu all provide free streaming services.

Another strategy savvy consumers use to get more bang for their buck is to take advantage of cashback benefits offered by certain credit cards. By selecting premier credit cards, the rebates can be used to take a bite out of inflation. Many people brag that they rely heavily on cash rebates to pay for most of their travel.

Review Your Investment Portfolio and Make Adjustments to Protect Against Inflation

Few financial consultants would argue against ongoing reviews of your financial plans during stable economic times, but during inflationary periods, it makes sense to take immediate action to ensure that your retirement investments still make sense.

Use higher inflation figures to make calculations about retirement budget requirements for the future. Remember, it is always better to overestimate inflation than to come up short of funds by underestimating this major factor that significantly impacts your buying power. While it is common to use 3% when factoring in inflation to make accurate projections about future budgetary needs, it makes sense to use a higher interest rate for boomers retiring in the near future.

Budgeting Strategies During Inflation

Stocks have historically provided a healthy hedge to mitigate against inflation. Keeping that fact in mind, there is no need to start ditching stocks. Fortune quotes CFP Greg Giardino who advises retirees to invest in stock mutual funds. The rationale behind investing in stocks is based on a company’s ability to quickly adjust prices to accommodate inflationary pressures.

Treasury Inflation-Protected Securities (TIPS) represent another recommended investment option to combat inflation for boomers close to retirement or who are already retired. The reason these bonds are practical investments for periods of higher inflation is due to the fact that the value of the bond is structured to increase as prices increase.

Diversification is key for managing the negative impact of rising prices on a retiree’s nest egg. Keep in mind that cash is the most fragile asset class and is easily eroded by rising prices, substantially decreasing purchasing power.

Real estate offers an excellent investment opportunity during inflationary times since values typically increase with inflation, offering a buffer against rising prices. Rental properties and warehouse buildings, in particular, are favored income streams that investors swear by when prices start climbing.

Consider Working Longer or Take a Part-time Job

Baby boomers contemplating retirement might want to consider working a little bit longer as a way to continue to build savings while inflation creeps up. There is conclusive evidence that holding off retirement as long as possible makes financial sense. For example, boomers who retire as early as 62 when first eligible for social security payments, will lose 30% of their total retirement benefits. By waiting until 67, retirees qualify for the full amount of earned retirement benefits.

During inflationary times, it is preferable to live on earned income rather than spending retirement savings. When considering retirement, if possible, it is prudent to wait for inflationary periods to subside.

Many boomers find that shifting from full-time employment to part-time work represents a viable option. The more time you have to build your investment portfolio, the better.

Postpone Large Purchases Impacted by Inflation or Consider Alternative Options and Solutions

Before seriously considering a major home renovation, a trip, or new car purchase, it is important to fully understand how much more you’ll pay today versus how much it might cost at a future date. A perfect storm of supply chain snags and pent-up demand has proven to push prices up significantly.

Kiplinger recommends deferring unnecessary purchases when possible. For example, bathroom and kitchen remodeling has increased dramatically due to a shortage of raw materials. The supply chain nightmare responsible for these price swings is expected to settle down over time.

Vacation travel is another expense that has increased disproportionately in the past few months since the COVID-19 vaccines were made available. CNBC reports that airfares have climbed by 9% with international prices increasing by as much as 17%. The pent-up demand has skewed the economics of supply and demand in favor of the seller, with retirees being forced to pay top dollar to travel.

Finally, this is not the best time to buy a car. Boomers interested in saving money need to practice some delayed gratification for a period of time until the supply chain improves. The shortage of microchips coupled with high consumer demand for cars is creating havoc in the car industry.


While record inflation rates can significantly handicap unprepared retirees, there are ways to adjust to minimize the impact. By making some simple changes in your investment portfolio and budgeting as a consumer, baby boomers can rest assured they are prepared.