How Americans really feel about inflation data — and what they're doing about it

The rate of inflation is a subject that’s seemingly everywhere: discussed from the dinner table to the White House podium, and confronted in every trip you make to the market, the gas station, and beyond. If you’re in your 50s or older, it’s a subject you probably haven’t thought about until recently. If you’re much younger than that, it may be an entirely new and unwelcome experience.

For both retirees and those approaching retirement, inflation data feels especially dangerous. They’ve saved for retirement based on current costs and a much smaller anticipated rate of inflation. In this unexpected inflationary environment, they are wondering, “How long will my money last?”

With many consumers saying one thing about inflation and many economists saying another, what’s really going on in the economic environment – and what can you do about it?

Households feel the pinch from US inflation

According to Gallup, Americans say that inflation is the top issue facing the country, even more than crime, immigration, or other concerns¹, but it’s easy to see its impact on everyday prices. Inflation can have complex causes, but it’s easy to see its impact on everyday prices.

• The average US price of a gallon of gasoline has climbed from $2.19 in 2020 to $3.38 in 2024, an increase of 54%.²
• The average US price for a dozen grade A eggs has jumped 52.6% since January 2021, to $2.52.³
• The average US price for a gallon of whole milk has climbed by 13.2% over three years, to $3.96.⁴
   

Inflation rate: Reality versus perception

Much of what worries people about inflation may not be what they know, but what they don’t know. That’s one takeaway from research by Jackson in partnership with the Center for Retirement Research at Boston College,⁵ which shows that:

• More than half of investors surveyed were unclear about current inflation rates. A low level of awareness may be driving a high level of uncertainty among respondents.
• Investors may be overestimating future inflation. While 26% of investors believe inflation rates will exceed 5% in the next few years, only 7% of financial professionals – who likely follow economic news more closely – think so.

This difference between what investors and financial professionals think about inflation data is mirrored in another split – the one between consumers and economists. Consumers often focus on the high inflation numbers mentioned above, as well as on the 40-year high of 9.1% that the consumer price index reached in June 2022. One thing that makes inflation particularly painful is that wages didn’t keep up with inflation over much of the past three years, so the purchasing power of consumers has fallen.

Economists, on the other hand, point to the sharp decline in the rate of inflation over the past two years – by April 2024, inflation was down to an annual rate of 3.4%, just about a third of its 2022 high. The combination of lower inflation and a recovering economy has also enabled real wage growth, which means an increase in consumer purchasing power.

Neither of these perspectives is wrong, they’re just different – and they help explain why consumers tend to be less optimistic about the economy than many economists.
 

How people respond to inflation data, and how you can too

There may not be much that you can do about inflation. But there are things you can do to help minimize its impact on you and your retirement savings.

• Review your current expenses. There are discretionary expenses you can defer until you feel that times are better. For example, you can simplify vacation plans or a home improvement project.
• Use tools like the Jackson Retirement Expense and Income Calculator to see how inflation can affect your retirement.
• Review your investment strategy. Consider diversification^* against inflation and using stocks as a hedge. According to the Jackson/Boston College research, 42% of financial professionals increased client allocations in 2023 to annuities that have guarantees. Consider other inflation-resistant assets, such as Treasury Inflation-Protected Securities and commodities. Think about adding income sources such as rental income.
• Time to retire the 4% rule? Many retirees follow a rule-of-thumb that limits annual withdrawals to 4% of total retirement savings. Perhaps you could pare that down until inflation eases further. Any money that stays in your portfolio is money that can continue to earn income for you.
• Consider delaying Social Security benefits if you’re near retirement. Waiting gives you more time to increase your savings from earned income and increase the size of the Social Security checks you will eventually receive.
• Consult your financial professional. The Jackson/Boston College research shows that investors who work with a financial professional cut their inflation losses in half compared to investors who go it alone.

Inflation is a storm to weather until it passes. What you do now can help determine how well your investments hold up. Talk with your financial professional for the strategies that are right for you, and how to implement them.