The Retire Sooner Method: Planning for Inflation

Welcome back to my series on the great retirement book The Retire Sooner Method: The 5 Secrets Behind America’s Happiest (and Unhappiest) Retirees 

So far we’ve had the following posts in this series:

• The Retire Sooner Method: Overview
• The Retire Sooner Method: Overview, Part 2
• The Retire Sooner Method: Secret #1, The Money Green Zone
• The Retire Sooner Method: Secret #1, The Money Green Zone, Part 2
• The Retire Sooner Method: Secret #2, Core Pursuits
• The Retire Sooner Method: Secret #2, Core Pursuits, Part 2
• The Retire Sooner Method: Secret #3, Social Connections
• The Retire Sooner Method: Secret #3, Social Connections, Part 2
• The Retire Sooner Method: Secret #4: A Written Plan
• The Retire Sooner Method: Secret #5, The Happy Retiree Superpower of Sleep

If you missed any of those posts, you’re going to want to go back and read them before you read this one, since today’s post is a continuation of the others.

Today we’re discussing the book’s thoughts on how to deal with inflation.

This is obviously a timely topic. Inflation has been front and center for the past several years, and retirees feel it in a very direct way. When you’re working, rising prices are annoying, but you may still have raises, bonuses, promotions, business growth, or side income to help offset them. When you’re retired, especially if you’re living mostly from a fixed income or a portfolio, inflation feels more threatening.

That doesn’t mean it can’t be managed.

But it does mean you need a plan.

Let’s get to it.

Inflation is Worry #1

This chapter starts off with a surprising finding: inflation, at least in part, is the top worry for retirees.

From the book:

Uncontrollable economic conditions: market volatility, inflation (the rising cost of living), etc. — nabbed the #1 spot, ranking as the most prevalent over-all concern for retirees. This was even higher than declining health (#2) and an overall worry about running out of money (#3).

First of all, “uncontrollable economic conditions” seems like it could mean a lot of things. Are we sure inflation is a vital part of this?

Second, if inflation is included, it’s likely a result of when the survey the book is built upon was taken: 2025. Do you think inflation was on the top of anyone’s mind that year? Hahahaha.

Anyway, here’s what the survey said were the biggest challenges for people contemplating retirement:

• Uncontrollable Economic Conditions – 60%
• Declining Physical or Cognitive Health – 56%
• Running Out of Money – 49%
• Boredom or Lack of Purpose – 30%
• Loneliness or Isolation – 24%
• Loss of Independence – 22%
• Paying Off Debt – 17%

I’m not sure if these “challenges” were at the level of “Hey, I need to keep these in mind as I retire” (which is just being wise) or “These are freakling me out and I may never retire!” (which is paralyzing panic).

Those are very different things.

As for me, some of these were issues I wanted to be aware of and plan for as best I could. Others were not concerns at all.

The ones that were zero concern for me were:

• Running out of money. We had more than enough when I retired, and we’ve only grown our assets since then.
• Boredom or lack of purpose. I knew retirement would be better than work and that I had enough interests to get started.
• Loneliness or isolation. I had my wife, family, ESI Money, and later MMM, plus other activities that created social interaction.
• Paying off debt. We had no debt, so this was not even on the radar.

The bigger issues for me were health and the unknowns that come with aging. You can plan financially. You can build activities. You can maintain relationships. You can exercise, eat well, and take care of yourself. But none of us controls every health outcome, and that’s one of the realities of retirement.

Still, the goal is not to eliminate every possible concern. That’s impossible. The goal is to identify the concerns that matter, plan for what you can, and adapt as life unfolds.

How about you? Any of these concern you? And if so, how much?

Inflation Not Always Bad

The author then twists the script with this:

Here’s something that might surprise you: Inflation isn’t always the villain it’s made out to be. In fact, a dash of inflation over time is actually an important part of the recipe for a functioning US economy.

Mild inflation puts healthy upward pressure on the value of goods and services. Meanwhile, static investments — like those crisp twenty-dollar bills sitting in your wallet — slowly lose purchasing power. This natural erosion motivates people to spend on goods today rather than waiting until they become more expensive tomorrow. It also encourages investing in assets that appreciate over time instead of keeping cash under the mattress or in a checking account earning an amount of interest that wouldn’t even interest a squirrel saving for winter.

Just for clarity: inflation up = the purchasing power (or value of the dollars sitting in your wallet) down.

But the relentlessness is not all bad. Think of stable inflation as a gentle nudge, prompting us to put our money to work before it weakens.

No, inflation is not all bad.

A little inflation is part of the system. It encourages spending and investing, and it’s much better than deflation, where people delay purchases because they think prices will fall. That can slow the economy, hurt businesses, reduce wages, and create its own set of problems.

That said, retirees don’t care much about the theoretical benefits of inflation when their groceries, insurance, utilities, property taxes, travel, and restaurant meals all cost more.

What matters to retirees is this: can my income and assets keep up with rising costs?

That’s the practical question.

So inflation is something to be aware of and plan for, which is what this chapter is about.

How to Combat Inflation

Here’s the 10-second explanation of how to address inflation in retirement:

The key is to invest your dollars in a way that either keeps up with inflation or outpaces the rate of inflation over time.

Very simply, if we want to maintain our purchasing power, we have to invest in assets that inflate along with inflation.

Our job is to invest in assets that inflate along with inflation.

Sounds pretty simple, right?

But what are these assets?

Well, first of all, you have stocks.

While inflation has been running high the past several years, has anyone noticed what stock index funds have done? Hahahaha. They have been on a HUGE upward swing, at least as I write this.

This is why our net worth has gone up dramatically. Most of our assets are in stock index funds, and those have done quite well over the past several years.

A few thoughts on stocks and inflation:

• Stocks are not a perfect inflation hedge in any given year. There can be periods when inflation is high and stocks struggle, especially if interest rates rise, valuations compress, or the economy slows.
• But over long periods, owning productive companies has been one of the best ways to fight inflation. Companies can raise prices, grow earnings, increase dividends, and benefit from owning assets that rise in nominal value.
• This is one reason I’ve always liked simple stock index funds. I don’t need to guess which companies will be the winners. I can own a broad slice of the market and let capitalism do its thing.
• Cash feels safe, but over time, inflation quietly eats it. Stocks feel risky in the short term, but over time, they have historically been one of the best tools for preserving and increasing purchasing power.

What else helps fight inflation?

Another one of our trusted investments from past years:

While stocks might get most of the attention in investment discussions, real estate deserves its own spot in our inflation-fighting arsenal.

There’s something deeply satisfying about owning a tangible asset you can actually see, touch, or even live in — especially when that asset has a rich history of keeping pace with or exceeding inflation.

As you might recall, we bought rental real estate way back in 2012 when prices were still low. This sounds almost like a fairytale these days, but we purchased 14 rental units in Grand Rapids, Michigan for $600k.

Actually, that’s not completely true. $600k was the all-in price. We bought them for a lot less, then put a ton of money into them to upgrade them, which in turn raised the rents.

Then we sold them for way more than we paid for them a few years ago because I was simply done with being a landlord.

Again, that turned out to be a great move.

A few thoughts on real estate from my experience:

• Real estate can be a powerful inflation fighter because both property values and rents can rise over time.
• It can also produce income, which is especially useful in retirement.
• But real estate is not passive, no matter how many people on the internet try to sell it that way. There are tenants, repairs, vacancies, property managers, insurance, taxes, legal issues, and plenty of surprises.
• I’m glad we owned rental real estate when we did, and I’m also glad we sold when we did. It was great for us financially, but I don’t miss being a landlord.

But even if you don’t own rental real estate, you still may be in the game. The book makes these comments next:

For many Americans, your house isn’t just where you live — it’s likely your largest single investment, and it can be one of your most effective inflation fighters.

Better yet, if you’ve paid off your mortgage, you’ve locked in your housing costs at a relatively fixed level (annual property taxes, insurance, etc.). It’s like having price protection on one of your biggest monthly expenses — an invaluable advantage during inflationary periods. They say “home is where the heart is, to which I’d add: home is where the hedge is (the inflation hedge).

This is probably the time to mention that there’s the national inflation rate and then there’s your personal inflation rate.

You can’t control the national inflation numbers, but you most certainly can control your own personal inflation rate.

How can you do that?

Here’s an example. These are completely made-up numbers to illustrate a point, so don’t come at me if I’m not in line with the CPI you might be looking at for whatever dates you might choose.

Let’s say you spent $750 a month on food for your family. Some of that was food at home, and some was eating out, including going out to eat plus DoorDash.

That’s $9,000 a year.

Now let’s say food inflation is 10%, just to use round numbers. That means if you did exactly the same thing, you would pay $9,900 the next year.

But you can do things differently.

You can:

• Eat out less and eat more at home.
• Pick up food yourself versus using DoorDash.
• Eat out as much but choose different (less pricey) restaurants.
• Go out at different times of day, since lunch is usually cheaper than dinner.
• Eat out but forego drinks or dessert.
• Try new places that often offer deals to get new customers in the door.

There are a whole host of things you can do to make sure your personal costs go up less than the official inflation rate. And you can apply this to almost everything: clothing, vacations, home improvements, entertainment, travel, insurance, cars, and on and on.

And don’t say it can’t be done, because it can.

We did it for decades.

This is part of the adaptability we’ve talked about before in retirement. If you can make adjustments along the way — to your finances, to your life, or to both — you will likely have a much happier retirement than those who “must” have something one way and won’t consider any alternative.

That’s a big deal.

Retirees who are flexible have more levers to pull. If inflation hits, they can adjust spending, change travel plans, delay a purchase, substitute one activity for another, or temporarily reduce withdrawals.

Retirees who are rigid have fewer options. If everything is a must-have, inflation hurts a lot more.

The book moves back to rental properties for a bit with this:

For those who own rental properties, the inflation-fighting benefits are even more pronounced. Not only does the property itself tend to appreciate with inflation; the income it generates can be adjusted upward as well. When your costs increase, you raise rents accordingly.

Yes and no.

If the market is raising rents, you can too. But competition can also keep rates in check, so you might not be able to raise them as much as you’d like.

A few additional thoughts:

• Rental income can rise with inflation, but it is not automatic. You can only charge what the market will bear.
• Local supply and demand matter. If there are lots of competing rentals, your ability to raise rents may be limited.
• Tenant quality matters too. Sometimes keeping a good tenant at a slightly below-market rent is better than pushing rent higher and risking vacancy or turnover.
• Expenses rise as well. Insurance, taxes, repairs, labor, materials, and management fees can all increase, so higher rent does not always mean higher profit.

So yes, rental real estate can be a strong inflation hedge, but like everything else, the details matter.

Other Inflation Options

Now that the book has covered the big two inflation fighters (stocks and real estate), we move on to other options with this:

While stocks and real estate are powerful ways to outpace inflation, sometimes we’re simply looking for investments that won’t lose ground. This is where bonds, fixed-income securities, and money market accounts come into play.

I invest in stock index funds to fight inflation and keep a good amount of cash. That’s it.

Sure, it’s probably not optimal, but I’m way past maximizing every penny. Or even every dollar. Or even every thousand dollars. Or maybe more.

I know there are more complicated ways to build a portfolio. You can add bonds, TIPS, CDs, money markets, commodities, real estate funds, private investments, and all sorts of other pieces. Some of those can make sense depending on your situation.

But for me, simplicity has enormous value.

I don’t want to spend retirement managing a complicated investment machine. I want enough growth to stay ahead of inflation, enough cash to sleep well, and enough overall margin that I don’t have to optimize everything.

That is a luxury, of course, and it was built by decades of earning, saving, and investing.

You know, as I once heard somewhere, “If you will live like no one else, later you can live [and give] like no one else.” Hahaha.

It’s true, you know.

If you’re willing to make the hard choices and trade-offs early in life, then you have a ton of freedom later in life.

These days, many people seem to want the latter without the former. It doesn’t work that way.

Most of those who are wealthy now have made decisions and taken actions for DECADES to be where they are now. So for those out there reading this now, if that’s what you want, you need to make similar decisions.

Remember, if you want what I have, you have to do what I’ve done.

Ok, that was a bit of a tangent, but I could have said it earlier too when we talked about personal inflation. I guess it built up in me over the last few minutes. Lol.

Moving on, Moss offers this next:

Investing in private equity or private companies — or your own company — offers yet another powerful way to combat inflation, with some unique advantages. Unlike publicly traded companies where you’re one of thousands of shareholders, owning a private business gives you more direct control over pricing. When inflation pushes up costs, private ones can adjust prices accordingly — often more nimbly than large corporations.

Investing in private companies isn’t easy, and it comes with a lot of downsides, in my opinion.

I’d much rather have my own company and prefer my “investment” to be time and effort instead of money.

Those investments have done quite well for me in retirement and are still yielding results to this day, even though I have been reducing the time I commit to them.

I am, after all, retired! Haha.

A few thoughts on private businesses:

• Owning your own business can be a great inflation hedge if the business has pricing power, low capital requirements, and strong demand.
• But private business investing can also be risky, illiquid, hard to evaluate, and difficult to exit.
• If you invest in someone else’s private business, you may have little control and limited transparency. That’s not my favorite combination.
• If you build your own business, you may have more control, but you also have more responsibility. And responsibility can start to feel a lot like work if you’re not careful.
• For me, ESI Money and MMM are good fits because they are interesting, meaningful, flexible, and not capital-intensive. That’s very different from buying into a private company I don’t control.

Moss starts to wrap up this chapter with this summary:

By strategically investing in companies that pass along price increases, owning real estate that appreciates with inflation, and maintaining defensive fixed income positions, you can build a comprehensive shield against inflation’s fiery breath.

The bottom line? Your retirement portfolio needs to include enough growth-oriented investments to combat inflation, or your supposedly “safe” withdrawal rate won’t be safe at all. We don’t want you reaching into your wallet twenty years into your retirement just to discover that those wilted dollars buy only half of what you need.

This is the key point of the chapter, and I agree with it.

A retirement portfolio cannot be built only to avoid short-term volatility. It also has to be built to survive long-term inflation.

That’s a major tension in retirement investing.

If you hold too much in stocks, you may worry about market declines.

If you hold too much in cash, you may lose purchasing power.

If you hold too much in low-yield fixed income, you may feel safe in the short run but become vulnerable over decades.

There’s no perfect answer because every option has risk. The question is which risks you are taking and whether you understand them.

For most retirees, some level of growth is necessary. You may be retired, but your money still needs to keep working.

Then he ends with this, which will lead us into our next post in this series:

So how do you build a portfolio that can both generate the income you need today and grow enough to protect your purchasing power tomorrow? How do you balance the safety you crave with the growth you require? How do you create an investment strategy that lets you sleep well at night while still keeping pace with rising costs?

That’s exactly what we’ll tackle in the next chapter.

Interested? Stay tuned as we’ll cover that chapter soon.