Yours truly was quoted in the San Francisco Chronicle again last week- The new financial threat to your California retirement — and how to handle it
Here’s the good stuff:
Rick Valenzi, founder and financial planner for Financial Zen in San Francisco, said his clients have expressed concern about how to afford rising insurance, energy and other costs such as food.
“What they’re really concerned about isn’t the actual costs, but if the recent inflation rate is the new normal,” he said. “In other words, will prices continue to rise at their most recent pace?”
He refers to inflation as a “silent killer,” which “goes unnoticed until it doesn’t.”
“What’s happened with the most recent economic cycle is that we had virtually 0% inflation for 15 years, and now we’re catching up to the historical inflation rate all at once,” Valenzi said.
Though insurance and energy bills are rising, Valenzi noted that they account for a smaller portion of retirees’ spending than other costs that are affected by inflation, such as food and entertainment.
And there’s another “bright side” for some, he said: “The most expensive California-specific expense is housing, and most people locked into the lowest mortgage rates in history before this round of inflation flared up.”
How to manage rising costs in retirement
Though unpredictable utility and insurance costs may have thrown a curveball at many Bay Area residents’ long-term retirement finances, experts say careful planning can help — to a point.
“A smart retirement income strategy should account for inflation, negating the need to save more,” Valenzi said. “Our strategy includes putting 10 years of living expenses into a laddered bond portfolio. The bond interest earned keeps pace with inflation, which we use to supplement higher costs.”
If the plan is structured properly, then a retiree shouldn’t need to cut back on other expenses, he added.
For some, these added costs may be too much, and Valenzi said he’s not surprised that some people preparing for retirement are considering moving out of state.
“I applaud anyone’s willingness to change their situation to fit their finances,” he said. ”Between energy, insurance, taxes, gas, food and entertainment, Californians pay a premium to live here. But if you can’t afford that premium, moving could very well be your best option.”
