The Consumer Price Index (CPI), the government’s main gauge of inflation, rose 5.4 percent the 12 months ended July, the highest reading since 2008. Although some economists say that the rise in prices is a temporary side effect of the COVID-19 pandemic, even fleeting inflation can hit households — particularly those of retirees who live on a fixed income — hard.
Inflation is cumulative and, much like compound interest, adds up over time. For example, the CPI has risen at a 1.9 percent average annual rate the past 10 years, according to the Bureau of Labor Statistics (BLS). That means an item that cost $10 a decade ago now costs about $13 — a 30 percent increase.
You can’t avoid inflation entirely, but you can do your best to minimize its effects on your budget. To learn about five ways to take the sting out of the rising cost of living, from the AARP, CLICK HERE.