Did you know in 1980 the average cost of a loaf of bread was 50 cents? In 2015, a loaf of bread averaged about $1.98, or nearly a 300 percent increase over the last 35 years. Welcome to the world of inflation.

Inflation impacts everyone, whether you are just starting out, in the prime of your career, or already enjoying your retirement. However, special consideration must be paid to retirement spending because inflation disproportionately affects retirees.

Inflation is a steady increase in the price of goods and services, but not all prices increase at the same rate. The inflation rate for groceries is much lower than for medical expenses. How inflation works on a retiree’s basket of goods and services is very different than a person actively working. As we age, and especially after retirement, our spending changes. What a person buys before retirement is fundamentally different than what is purchased after retirement.

A March 2016 article1 from the U.S. Bureau of Labor Statistics (BLS) discussed how spending categories change for older Americans, and how housing and healthcare expenses make up half of a retiree’s budget.


Older Americans spend relatively more on housing than the general population. Although nearly 70 percent of elderly homeowners over age 75 have paid off their mortgages, there are other costs associated with homeownership, such as maintenance, taxes and insurance. Also, a significant number of older people are renters. According to the BLS, 36.5 percent of their budget goes toward housing expenses.


With declining health as we age, health care takes a greater share of our retirement income later in life. The share of total spending going toward health care for the elderly is 15.6 percent – nearly double the rest of the population. Not only does the increased need for medical care increase the cost, but the rate of inflation on healthcare places a greater burden on retirement assets. This is especially true for those not yet eligible for Medicare or in need of long-term care.

When you live on a fixed income in retirement and consumer prices rise, you lose purchasing power. Your dollars do not go as far as they once did because the prices of consumer goods increase faster than your income. The good news is that although more of our budget is spent on housing and healthcare in retirement, there are many other things we will spend less on in retirement to help offset the change in spending.

  • Your work related expenses will decrease. You will no longer be driving back and forth to work, so transportation costs go down. You may also save money on buying and cleaning new work clothes.
  • You may no longer be saving for retirement by participating in OPERS, Social Security, or a defined contribution plan. You are no longer saving for retirement; you are spending in retirement.
  • Your tax liability may decrease if your annual income is less after retirement.

There are many variables to consider in retirement planning, and inflation is just one of them. For more information to help you understand your retirement, please visit the OPERS website at www.opers.ok.gov.

Ann C. Foster, “A closer look at spending patterns of older Americans”, Beyond the Numbers: Prices and Spending, vol.5, no 4 (U.S. Bureau of Labor Statistics, March 2016), https://www.bls.gov/opub/btn/volume-5/spending-patterns-of-olderamericans.htm

This article was first published in the Summer 2016 edition of the Retiring Right newsletter. Click here to view other newsletters. Not receiving your newsletter, update your address by completing the Change of Address form.

Skip to content