What Risks Do Near Retirees and Retirees Face from Inflation, and How Do They React?

The report’s key findings are:

• High inflation tends to harm older households, but the size of the impact varies due to three factors:
  1. the extent to which income and assets keep up with rising prices;
  2. the amount of fixed-rate debt, which declines in real terms as inflation rises; and
  3. the extent to which households respond.
• Absent any response, retirees are hurt more than near retirees as, outside of Social Security, their income is less indexed to prices and they hold less debt.
• Among households that do respond, new data show that many tap assets and cut back on saving, which means more consumption today but less tomorrow.