What Is Inflation Risk?Inflation is the rise in prices over time. As prices rise over time, your money purchases fewer goods and services, and the result is that your money is worth less. Inflation is especially problematic for those who are retired; for one thing, retired people depend more on income sources that are not adjusted for inflation; for another, they usually have less time to benefit from growth in their investments and from income from work.
Inflation risk, therefore, is the risk of rising prices affecting your standard of living over time. Inflation can lead to:
- Being unable to maintain your desired standard of living.
- Needing to return to the workforce.
- Increased energy costs of heating your home.
- Needing to cut back on certain necessities, such as food or medicine.
- Needing to live with family or move to a smaller residence.