As we have conversations with our clients about the current economic landscape, many of the questions we answer revolve around inflation.

You probably understand the impact of inflation because you can see your grocery bills and gas prices have increased, but many of us have not experienced real inflation before in our lifetime. Over the last 25-30 years, we have experienced relatively low inflation primarily due to the globalization of manufacturing and technology advances.

What Are Some of the Biggest Impacts of Inflation on People’s Lives?

Inflation does insidious damage to a long-term financial plan by regularly increasing costs over the decades. Periods of high inflation are actually as damaging or more damaging than periodic declines in the markets. Costs that go up, rarely go down, and rising expenses require larger capital balances to maintain lifestyle in retirement.

Some of the Biggest Drivers of Current Inflation?

Inflation is a global experience – it’s not just a U.S. problem. The primary drivers right now are

  • COVID – supply chain disruption/onshoring/labor force participation)
  • Energy prices – Russian war and general energy policy)
  • Federal Reserve – quantitative easing/too low too long; borrowing below zero
  • Fiscal policy – primarily stimulus payments and business support. While helpful to many, this pushed trillions of dollars into the economy with a sledge hammer rather than a framing hammer

What the Government Can Do

The Fed has really only one way to fight inflation and that is to blunt demand. They do that through money supply and interest rates. As they raise interest rates, the cost of borrowing goes up and slows economic activity.  That is why markets tend to struggle in periods of high inflation.

How Inflation Impacts Your Financial Future

One of the best ways to address inflation is by planning ahead and understanding that the risks are substantial. Do not ignore it. This issue is a big concern for today’s retirees. They will likely experience a longer retirement than any other generation ever. They need to guard against the insidious damage done by regularly increasing costs over the decades. This underscores the importance of clearly understanding your lifestyle expenses in a detailed way and reviewing and updating your financial plan.

For informational purposes only. Not intended as investment advice or a recommendation of any particular security or strategy. Past performance is not indicative of future results. Information prepared from third-party sources is believed to be reliable though its accuracy is not guaranteed. Opinions expressed in this commentary reflect subjective judgments of the author based on conditions at the time of writing and are subject to change without notice.For more information about Wealth Dimensions, including our Form ADV Part 2A Brochure, please visit or contact us at 513-554-6000. Please be advised that this material is not intended as legal or tax advice. Accordingly, any tax information provided in this material is not intended and cannot be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer.