Inflation Is Still Rising, But It's Less Likely to Hurt Some Retirees — Here's Why

• Despite falling gas prices, annual inflation rose by 8.3% in August, according to the U.S. Department of Labor.
• However, some retirees won't feel the sting of most higher costs, experts say.

Despite falling gas prices, inflation was higher than expected in August, curbing optimism for lower day-to-day expenses. But some retirees won't feel the sting of elevated costs, experts say.

Annual inflation rose by 8.3% in August, fueled by growing costs for food, shelter and medical care services, the U.S. Department of Labor reported Tuesday.

Inflation has pushed one-quarter of Americans to delay retirement, a recent survey from BMO Harris Bank found. But spending changes throughout people's golden years may reduce the impact of some rising costs, according to J.P. Morgan Asset Management's 2022 Guide to Retirement.

"It's getting below the headline," said Katherine Roy, chief retirement strategist at J.P. Morgan, explaining how the basket of goods retirees purchase may shift over time.

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Older Americans may spend less overall

J.P. Morgan suggests using a separate line item for the rising cost of health care, which has a 6% growth rate, and other spending categories may only inflate by 1.5% to 2% annually, Roy said.

If you pull out health care, retirees tend to spend less in real terms until age 80 on other categories, she said.

These findings align with a SmartAsset analysis showing retirement spending decreases in 11 of the 14 core categories found in the U.S. Bureau of Labor Statistics Consumer Expenditure Survey.

For example, despite higher prices at the pump in June, older households generally spend less on transportation than families ages 35 to 44, making them less vulnerable, the report found.

And some retirees may have the flexibility to buy less gas by combining trips or sharing rides, said certified financial planner Catherine Valega, a wealth consultant at Green Bee Advisory in the greater Boston area.

"I don't think we need to panic," said Valega, explaining how price changes may be a chance to revisit budgets and long-term plans.

Retirees' expenses generally decline over time

Although the rising cost of health care is a concern, it's not enough to offset the decreases in retirees' spending on housing, food and transportation, said CFP Anthony Watson, founder and president of Thrive Retirement Specialists in Dearborn, Michigan.

"For the majority of people, those other expenses go down over time," he said.

Of course, rising costs may be hardest on lower-income households, which tend to experience higher inflation rates, according to a working paper from the National Bureau of Economic Research.

However, it's important for retirees to have a long-term perspective when it comes to inflation, the J.P. Morgan report contends.

"It's just a point in time and what matters is the average," Watson said.

"Yes, we're experiencing high inflation right now," Roy said. "But we've come out of a historically low period for a really long time."