The First Budget Item Retirees Should Rework When Inflation Stays High
Written by
Jordan Rosenfeld
Edited by
Molly Sullivan
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For retirees, inflation hits differently than it does for workers, because income is often fixed while expenses keep climbing — they can’t get a raise or work overtime to cover these costs. High inflation forces retirees to make tough budgetary tradeoffs, but not all budget categories deserve equal scrutiny.
Financial planners and retirement experts said the key is knowing which category to reassess first and why. Depending on the household, that might be lifestyle spending, healthcare premiums, travel and memberships or even housing itself. Here’s how experts approach the question and how retirees can decide where to start.
Discretionary Spending Is Often the First Place To Cut
The “first to go is discretionary spending,” said Jay Zigmont, a CFP and the founder of Childfree Trust®. Expenses tied to lifestyle creep are often the fastest way inflation destabilizes a retiree’s budget.
He pointed to dining out and food delivery services as especially budget-unfriendly. While groceries are also rising in price, he noted, they “will always be cheaper than eating out.” Small convenience choices can quickly drain monthly cash flow.
Cutting large leisure expenses can put hundreds per month back in your pocket to put toward more essential needs such as healthcare or housing.
Other Categories To Work On
For many people, discretionary spending is the easiest category to cut. But there are a couple other categories to regularly look over — as you may need to allocate more money to them or rethink how you handle them.
Medicare and Healthcare Costs
Andrew Matz, a financial planner at Oak Road Wealth Management, highlighted healthcare as a category that often needs rethinking rather than cutting outright. Because retirees can’t easily reduce these costs, other parts of the budget may need to shrink around them.
With Medicare Part B premiums increasing by about 9.7%, he said, “More money will need to be budgeted towards health insurance and potentially less towards a different category, like lifestyle spending.”
Housing Costs
Housing is another largely nonnegotiable category, but retirees can sometimes rework how housing fits into their broader financial pictures. Melissa Macerato, a mortgage industry veteran and chief revenue and marketing officer for Longbridge Financial, said many retirees are sitting on substantial untapped assets.
“Many retirees … are sitting on significant home equity while living on fixed or semi-fixed incomes, a dynamic often described as being asset-rich but income-constrained.”
In some cases, it may be time to revisit long-held assumptions about home equity. “That doesn’t mean having to sell a home or make drastic life-altering financial changes, but it does mean revisiting long-held assumptions about keeping home equity completely off limits,” she said.
The Warning Sign That a Category Needs Reworking
One clear red flag that a budget needs reworking is reliance on credit cards, especially if balances aren’t being paid off each month, Zigmont said.
“Debt is particularly dangerous for retirees as it is stealing from your future, and on a fixed income, you won’t have the extra to pay it off,” he added.
Reviewing monthly statements can help retirees identify which recurring expenses are quietly being financed and where cuts may be necessary.
Budgeting Isn’t One Size Fits All
There is no single budget category that works for every retiree. But experts agreed that inflation rewards early, intentional adjustments and punishes avoidance. Whether the first change is lifestyle spending, healthcare, travel or housing, the sooner retirees confront the pressure points in their budgets, the more flexibility they preserve over the long run.
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