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The examples and case studies in this article are hypothetical but represent real situations I have encountered in my practice working with Washington State public employees.
The number on the news isn't the number that mattersA corrections officer reaches out the week the latest inflation report makes the news. He is 54 and plans to retire at 57 on his PSERS 2 pension. He has saved steadily, mostly through his DCP. And now a headline has him rattled. “Prices went up almost 4 percent,” he says. “What does that do to my plan?” It is a fair question. Over the 12 months ending in April 2026, consumer prices rose 3.8 percent, the fastest pace in almost three years.1 But here is what I tell him, and what I tell most people who ask. The inflation number in the news is almost never your inflation number. Two people can retire into the same economy and face very different risk. The gap between them usually comes down to a few things they can actually control. So instead of reacting to the headline, we walk through three questions. Question one: what is your personal inflation rate? The national number is an average. It is built from a big basket of goods and services meant to represent the typical household, with categories like shelter, food, energy, and medical care each carrying a different weight.1 Think of it like a statewide weather report. It might say the average high is 60 degrees. That tells you almost nothing about what to wear in your own zip code. He sits near the calm end of that range. His house is nearly paid off. His spending is steady. His biggest splurge is a fishing trip each fall. Now picture a different retiree. She leaves work at 58 and bridges to Medicare on PEBB coverage, so she is paying a health premium for seven years. She is also driving more to help an aging parent, right as fuel prices climb. Her budget leans on categories that have been rising faster than the average. Energy jumped 17.9 percent over the year, and gasoline rose 28.4 percent.1 Research on older households points the same direction. Retirees tend to spend more on healthcare, and healthcare prices often rise faster than the broad index.2 Same 3.8 percent headline. Two very different realities. Question two: how much of your income already keeps up? This is where Washington public employees have a real advantage, and where the details matter. Some of your retirement income is built to rise with prices. Social Security usually gets an annual cost-of-living adjustment.2 Many DRS pension plans include a cost-of-living adjustment too. It is worth knowing exactly how yours works before you retire. Your plan handbook on the DRS website spells it out. Then there is everything that does not automatically rise. Your portfolio withdrawals usually do not come with a built-in raise unless you design the plan that way. The tools built specifically to fight inflation are Treasury Inflation-Protected Securities (TIPS), I bonds, and stocks.4 Stocks are not a reliable hedge in any single year. But over long stretches they have been one of the best defenses against rising prices.4 Over the last century, inflation has averaged roughly 2.9 percent a year.3 Cash and traditional bonds are the opposite. They pay you in fixed dollars, so high inflation quietly eats their real value.4 This is why your pension matters so much. It is an income floor that lets the rest of your money stay invested for growth. Question three: where are you on your timeline? Timing might be the most overlooked piece. High inflation early in retirement does lasting damage. If prices jump in your first few years, your baseline spending resets higher, and every future year builds from that higher number.3 Researchers compare this to sequence-of-returns risk. A bad stretch early, when your time horizon is longest, hurts far more than the same stretch later.3,4 The worst historical outcomes for retirees clustered around the high-inflation years of the late 1960s and 1970s.4 While you were working, a raise could help offset rising prices. In retirement, that built-in cushion is gone.4 The point is not to predict inflation. It is to build a plan flexible enough to absorb it. What actually helps A few measured steps, not a fire drill. Map your own basket. List your real spending categories and notice which ones run hot. For an early retiree on a PEBB bridge, that is often healthcare. This turns a vague worry into something you can measure. Know your two COLAs. Confirm how your DRS pension adjusts, and remember Social Security carries its own annual adjustment. Together they cover a meaningful share of your fixed costs. Keep real stock exposure. Because your pension covers the floor, your portfolio can stay invested for the long-term growth that actually outpaces inflation. Build a war chest. I generally like keeping around five years of planned withdrawals in high-quality, short-duration bonds, spread across pre-tax, Roth, and taxable accounts. That way you are never forced to sell stocks in a down year, and you keep flexibility on which dollars to spend for tax reasons. Stay flexible. In a hot year, maybe you skip the full raise on your withdrawals, or push a big trip out a few months. None of it is permanent. Early on, small adjustments protect the whole plan. The bottom line He does not need to forecast inflation. Neither do you. What he needs is a plan that already expects uncomfortable years and is ready for them. Room to adjust. Room to draw from the right accounts at the right time. Room to let long-term investments do their job. Inflation will always be part of retirement. The goal is not to eliminate it. It is to keep rising prices from quietly running your decisions. As a CPA and financial advisor, and a former public employee myself, that is the work I find most rewarding: turning a scary headline into a handful of choices you control. Sources
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Content is for informational purposes only and does not constitute personalized financial or investment advice. Consult with a qualified financial advisor to discuss your individual circumstances before making any financial decisions.
AuthorsBob Deal is a CPA with over 30 years of experience and been a financial planner for 25 years. Archives
July 2026
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