Outpacing Inflation While Planning for Retirement

Why it often feels impossible — and how you can tilt the odds in your favor

Inflation is the silent retirement-killer. You may be diligently saving in your 401(k) or IRA, yet if your investments don’t outpace inflation, your real purchasing power erodes over time. Let’s break down the challenge — and how everyday investors can push back against it — one step at a time.

1. Fin’s Retirement Story: From “Age 167” to Making Progress

Ever seen one of those “When can you retire?” calculators online?

A few years back, I punched in my numbers, feeling pretty good about things — decent job, a bit in savings, a 401(k) that was “doing something,” right?

Then the calculator cheerfully told me I could retire at… age 167.

I laughed, but deep down it stung. It felt impossible. How could anyone ever save enough when the cost of everything — food, housing, even streaming services — keeps creeping up every year?

So I started small. A hundred dollars here. Two hundred there.
Every time I got paid, I told myself: “Future Fin gets at least something.”

It didn’t change overnight, but slowly the graph started to bend in my favor. That “167” started dropping. Then came the company match. Then compounding kicked in. Suddenly, the future didn’t look impossible anymore.

Lesson learned: you don’t have to be rich to start; you have to start to get rich — or at least, to beat inflation enough to retire before 167.

2. What’s happening with inflation — and why “lower” doesn’t mean “cheaper”

Inflation in 2025 sits around 3.0% year-over-year, according to the U.S. Bureau of Labor Statistics. That’s far below the spikes we saw in 2022 (~8%) and 2023 (~4%), but still above the Fed’s long-term 2% target.

Over the past 20 years:

(Sources: U.S. Inflation Calculator, Macrotrends, Investopedia)

Here’s the part many people miss:

A lower inflation rate doesn’t roll prices back — it just slows how quickly they keep climbing.

If inflation drops from 8% to 3%, prices are still rising 3% on top of last year’s 8%. Inflation is cumulative. Once prices rise, they rarely fall back down to pre-inflation levels.

That’s why even after “cooling” inflation, groceries, rent, and essentials can still feel painfully high — because they are higher. The slowdown just means they’re climbing the hill a bit slower, not going downhill.

The takeaway: beating inflation isn’t about waiting for it to cool — it’s about consistently earning more than its cumulative effect over decades.

3. Why inflation makes retirement feel impossible

• Your expenses rise automatically — groceries, healthcare, rent, insurance.
• “Safe” investments like savings accounts or bonds often yield less than inflation. Or nearly less a 5% Time deposit account for 10 years wouldn't have gained anything meaningful.
• When inflation spikes, it can wipe out years of slow, steady progress.

That’s why many savers feel stuck in an endless race — every time they inch forward, prices move faster.

But there’s hope. The key is choosing investments that outpace inflation consistently over the long term — not by guessing the next hot stock, but by using time, diversification, and compounding to your advantage.

4. Using your 401(k): S&P 500 vs Nasdaq 100

Inside most 401(k) plans, you’ll find options like:

Over time, Nasdaq-100-style funds have delivered higher returns — but with bigger swings. For investors with decades until retirement, that volatility can be an opportunity rather than a threat.

Key idea: If inflation is 3% and your 401(k) is earning 6–8%, you’re slowly getting ahead. If it’s earning 10–12%, you’re building real long-term wealth.

However, if you’re sitting in a 2% money-market fund, inflation is quietly robbing your future every month.

5. The slow-and-steady strategy that works

Fin’s story isn’t about luck — it’s about consistency. Here’s how to build on that mindset:

1. Start where you are.
   Even small amounts compound. $100 a month invested at 8% for 25 years grows to about $93,000.
2. Capture the match.
   If your employer matches contributions, that’s a guaranteed return. Don’t leave it on the table.
3. Tilt toward growth when you can.
   Younger investors or those far from retirement can handle more volatility for better long-term returns (like Nasdaq 100-tilted funds).
4. Rebalance yearly.
   Keep your mix of stocks, bonds, and cash aligned with your goals and tolerance for risk.
5. Think in “real dollars.”
   Always compare returns after inflation. A 5% return in a 4% inflation world is only 1% real growth.

6. A personal reality check

Fin isn’t alone — millions of people run those retirement calculators and get terrifying numbers. But what matters most isn’t where you start; it’s how consistently you move forward.

If your retirement age right now says “167,” that’s okay.
Every $100 you set aside moves it closer to 60, 58, 55… and that’s progress.

You don’t need to time the market. You just need to give your money enough time in the market.

7. The takeaway

Inflation is inevitable — hopelessness isn’t.
By consistently saving, maximizing employer matches, and smartly leaning into higher-growth investments early, you can build real wealth that keeps up with (and ideally beats) inflation.

Remember Fin’s lesson:

“You don’t have to be rich to start.
You have to start to get rich.”