About 1 in 8 Gen Xers and baby boomers say they’ve postponed or considered postponing retirement due to inflation, according to a March 2022 survey by the Nationwide Retirement Institute. With an inflation rate over 8% and hitting a 40-year high, coupled with a stock market that’s seen a double-digit percentage drop since the start of the year, people’s concerns aren’t misplaced.

“We’ve had conversations with multiple clients in the last six months,” says Mark Rylance, a certified financial planner in Newport Beach, California. “Every advisor has clients that push the envelope with spending, and they’re probably not going to change their spending habits, and those are the people who are at risk.”

If your stop-work date is on the horizon, here’s what you should understand about how inflation affects your retirement.

Why inflation matters

Inflation represents how much the cost of goods and services has gone up over a period, usually one year. If inflation on a particular item is 8%, that typically means that it now costs you 8% more than it did a year ago.

“In the simplest terms, if a retiree hypothetically spends $50,000 per year on variable expenses, and that $50,000 inflates by 8.5%, what used to cost $50,000 now costs $54,250,” Rylance says. “The threat to retirees is that their expenses go up forever and their investment returns don’t keep pace.”

When to run the numbers

If you’re planning to retire in the next year or two, you need to understand what you spend on expenses now that prices are higher because that’s how much your savings will have to cover.

“We have to look at our day-to-day living expenses as well as our big expenditures and other plans that might be on the horizon,” says Nicole Wirick, a CFP in Birmingham, Michigan. “From there, we then look to what income sources we have available to fund those needs.”

In other words, what are you expecting from Social Security? Do you have a pension? Do you have any other passive income sources, such as a rental property? Do you have any major spending plans, like a trip around the world? And — most importantly — what are you regularly spending?

“Everybody who is ready to retire has to do a pretty gnarly budgeting process,” Rylance says. “Every single time people do it, they go, ‘Wow, I had no idea I spent that much on that particular thing.’ Just going through that process, they change that behavior themselves.”

How to adjust your plan

If your retirement income and your budget after inflation aren’t meshing, you may need to rethink the timing of your workforce exit or the way you spend your cash.

Reconsider spending habits

Rethinking major purchases can help if higher prices make your retirement budget feel claustrophobic. If you have a big trip planned, consider waiting a year. Thinking of buying a used car and prices are up 30%? Put that off. Were you planning to move? You may want to wait until home prices cool a bit.

“If you don’t need to move out of your house,” stay a while, says Ashley Folkes, a CFP in Birmingham, Alabama. “You’ll get the maximum price, but if you can’t find a new house because of the shortage, and the prices are elevated, just wait.”

Reducing day-to-day spending will also help your dollars go further. Adults said they would cut back on dining out, driving and monthly subscriptions, among other things, if high prices persist, according to a recent poll from CNBC/Momentive.

Work longer — or part time

Another year (or more) in the workforce has the triple effect of letting you save more for retirement, allowing your nest egg to continue to grow (if possible) and postponing withdrawals during what might be a down market.

You may also consider retiring but taking on part-time work, which means you can withdraw less from savings for living expenses. “When we’re calculating a safer withdrawal [rate], sometimes people are only $10,000 or $15,000 short,” Rylance says. If you can find something you enjoy doing on a part-time basis, you can fill the gap.

“It’s really not that complicated,” Rylance says. “You either cut your expenses or find some other source of income.”

Wait to collect Social Security

This might go hand-in-hand with working longer, but the longer you wait to start taking Social Security benefits, the higher your benefits will be. After full retirement age, for instance, you’ll get an 8% increase for every year you wait to claim Social Security.

Overall, a higher inflation rate means you’ve got to check your math. For example, do you have enough savings to cover what you usually spend, even if everything costs a little more? And will your savings cover you for your full retirement? If not, you’ll need to make adjustments.

“There aren’t many things you can do to not outlive your money,” Folkes says. “You can delay retirement, you can work part time or you can spend less.”