You only get one chance at a successful retirement. Besides the basics like saving more money, what can you do to ensure a successful retirement? What insights can we gain from those who are already retired to better plan our own retirements?

1. Retirement is better than working

The majority of retirees, 67%, are happier on a typical day in retirement than they were on a typical day while working. Of the 33% who are not happier in retirement, about half say they are lonely. It’s no secret that loneliness is a leading cause of unhappiness and depression in older Americans, and having a network of family and friends that you regularly see can help ward off loneliness in retirement. Consider living in a community where many of your neighbors are also retired. You don’t necessarily need to move to The Villages, but having close friends and neighbors who are also retired can prevent loneliness.

2. Take care of your health

Being in good health can make or break your retirement. Of retirees that reported being happier in retirement than they were while working, 49% of them said they planned ahead by prioritizing their health before retirement. 44% of retirees are concerned about their finances in retirement, while 34% say health issues are their biggest concern. Saving for retirement and taking care of your health must go hand-in-hand. If you don’t take care of your health, it doesn’t matter how much you have saved for retirement. Just like it is never too early to start saving, it is never too early to prioritize your health.

3. If there’s something you want to do in retirement, don’t wait to do it

There’s a big gap in what we imagine doing in retirement, before we retire, and what we actually end up doing in retirement. The top activities pre-retirees imagine for retirement are traveling (79%) and exercising (71%). That makes a lot of sense. Traveling extensively can be difficult to do while employed, and it’s a common dream to “travel the world” once you retire. And exercising to stay in good health is another great goal. However, the top activity for current retirees isn’t traveling or exercising but watching TV.

Don’t take anything for granted in retirement. If there’s something big you want to do or accomplish, make concrete plans now instead of potentially waiting until it’s too late.

4. You might worry less about money

Interestingly, many retirees report worrying less about money than those who aren’t yet retired. 34% of pre-retirees are worried they will outlive their money, while only 22% of retirees fear the same. 46% of retirees say they have fewer financial problems than they anticipated before retirement. This may sound strange, but it’s how it should be: worrying about money, and adequately planning, before retirement can make it much less of an issue in retirement. 78% of retirees say they have more than enough or just enough money to last them through retirement, while 19% say they have less than they need.

It should be encouraging that a large majority of retirees believe they have enough money to last them through retirement, and many worry about money less than they did before retirement. This doesn’t happen without planning ahead and saving what you know you need to save for retirement.

5. When you retire matters

The period of higher inflation we’ve experienced since 2020 will likely go down in history as not the best time to retire. In 2020, before inflation had really started impacting retirees, 17% said their spending was a little higher or much higher than they could afford. Last year, 31% of retirees said their spending was a little higher or much higher than they could afford. Periods of higher inflation often hits retirees the hardest since many are on fixed incomes, with pensions that may not adjust for inflation and Social Security, and the last few years have been no exception.

When planning for your own retirement, it’s a good practice to hope for the best but be prepared for the worst. What happens if inflation skyrockets when you retire? Or what happens if you retire at the beginning of a prolonged stock market decline? Make sure your retirement plan is ready for the worst-case scenario.

Retirement is an exciting period of life if you’ve prepared well. Listen to those who are retired now and prioritize your health, make plans to accomplish your goals, whether that’s traveling, spending more time with friends and family, or something else, and be prepared to worry less about money and be happier than you were while working.

Has inflation hit a turning point?

I desperately want to write what everyone wants to read: “yes, higher inflation is gone for the foreseeable future and we have nothing to worry about.” But that may not be true. It is very difficult to predict the future of inflation with any degree of certainty. Who foresaw that we would experience high inflation over the last few years? I wrote earlier this year about just how difficult it is to forecast the future of inflation. The number of interest rate cuts predicted this year, something the Federal Reserve is predicted to do when they feel inflation is sufficiently under control, has been a roller coaster ride. The chart below shows how expectations for interest rate cuts have changed throughout the year, which goes to show that nobody really knows with any certainty what will happen.

I can’t tell you what inflation will do in the future. I can tell you the unexpected news of prices declining for the first time since 2020 is unequivocally good and a positive sign that we are moving in the right direction.

Will prices continue to decline?

The first decline in the Consumer Price Index in over four years might leave you wondering if prices could continue to decline and cause us to experience deflation instead of inflation. It’s tempting to dream of a decline in prices. What if we could all go back in time to 2020 when houses were more affordable, groceries didn’t cost an arm and a leg, and McDonald’s had a real dollar menu? As strange as it may sound, we definitely do not want prices to return to 2020 levels.

For prices to go back to what they were in 2020, we would have to experience significant deflation. And deflation doesn’t just happen in a vacuum. Prolonged drops in prices are the result of the economy suffering. It means wages would be dropping, Americans would lose their jobs en masse, and default rates on different types of debt would skyrocket. We’re all hoping for inflation to continue dropping to the Federal Reserve’s target level, but don’t want to experience deflation. One month-over-month decline in prices is not a sign we should start worrying about deflation, but it is important for the Federal Reserve to be aware of the danger of overcorrecting and keeping interest rates high for too long (and causing the economy to suffer).

Should you prepare for lower interest rates?

The chances of the Federal Reserve cutting interest rates this year, and maybe even cutting rates more than once, increased with the latest inflation data. When the Federal Reserve cuts rates, that affects everything from the interest rate on your high-yield savings account, to mortgage rates for homebuyers, and even the stock market.

As the likelihood of interest rate cuts increase, it could make sense to lock-in fixed rates on CDs or similar instruments if you are planning for a medium-term large purchase. For example, let’s say you are saving for a home and plan to purchase it in about three years. That timeframe is a little too short to feel comfortable investing that money in the stock market, but you could consider placing your money in a three-year CD which have rates as high as 5%. If interest rates drop, the rate on your CD does not. A 5% interest rate over the next three years may not sound like a huge deal, but if you are saving a large amount of money it could mean a few thousand extra dollars in your pocket at the end of the term.

For those who have taken out debt over the last few years when interest rates were higher, a decrease in rates could be a great opportunity to refinance your debt to a lower interest rate. We created a mortgage refinance guide to help you determine if it’s a good idea to refinance when lower interest rate mortgages are available. Refinancing higher interest debt is a great way to lower your cost of living and essentially give yourself a raise.

Nobody likes high inflation. Paying more for the goods and services you use everyday does not feel good, but thankfully we’ve received some pretty good news about inflation recently and, if this trend continues, the Federal Reserve could cut interest rates soon. We can’t tell you what will happen with inflation next, but we can help you take control of your finances and make the most out of every dollar. Newer to The Money Guy Show and want to know where to start? Check out this page created just for you.

Have questions about how to buy a home in this crazy market, ways to beat the system, and common mistakes home buyers make? Check out our Money Guy Guide to Buying a House!

How the expectation for rate cuts have changed this year

In January, prediction markets expected 5 or 6 interest rate cuts this year, which would significantly reduce the Federal Reserve target interest rate. Now, the consensus has dropped to between 1 or 2 interest rate cuts this year.

It is still very possible the Federal Reserve does not cut interest rates at all this year. Chair Jerome Powell has long said the central bank needs to see more evidence that inflation is on its way down to the long-term target of 2%, and in recent months inflation has been moving in the wrong direction. Data for March shows the overall Consumer Price Index (CPI) coming in at 3.5% year-over-year, hotter than expected and well above the 2% target.

This change in expectations may be very frustrating to consumers and businesses looking for interest rates to drop so they can make large purchases, like a home, or expand their business. For anyone that understands how inflation works, the dramatic change in expectations shouldn’t be surprising at all. Here’s why forecasting inflation, and interest rates, is so difficult.

Why forecasting inflation is so difficult

The last period of high inflation our country experienced, before 2020, began in about 1972 and lasted until 1983. As you can see from the chart below, inflation did not rise and then subside. Inflation seemingly peaked in late 1974, then came back and actually peaked in 1980.

The federal funds rate also had several peaks, and topped 19% before declining (if you think mortgage rates in the 6% or 7% range are bad, try 19% or 20%).

I am not predicting we will see a resurgence in inflation like we did in the 1970s and 1980s. I am saying that the future of inflation is very difficult to predict, and it may have a lot to do with consumer expectations.

Inflation expectations can influence reality

Consumer expectations for inflation remain elevated. Consumers aren’t expecting high inflation, but they expect inflation to remain higher than the Federal Reserve target of 2% in the short-term (one year) and medium-term (five years). Just like actual inflation, expected inflation has stalled out around 3% and doesn’t appear to be budging. It should be no surprise that actual inflation and consumer expectations seem to mirror one another. If you expect prices to keep increasing, you may spend more now while prices are lower.

Consumer spending is still increasing very sharply month over month, which creates sort of an inflation loop. Consumers expect inflation to remain elevated, although not as high as several years ago, and keep spending money like there’s no tomorrow. Consumer spending fuels inflation, which in turn fuels the belief that inflation will remain elevated. See now why it isn’t so easy to predict the future of inflation?

How you can win financially regardless of inflation

Persistently high inflation and interest rates can be very frustrating for those trying to borrow money, but it is still very possible to build wealth and make smart financial decisions no matter what inflation or interest rates do. If you want to help protect your wealth from inflation, owning assets like stocks and real estate are some of the best ways to hedge against inflation. If you are looking to borrow a large amount of money and want interest rates to drop, consider only borrowing what you can afford now or waiting for rates to drop. Do not borrow money at a rate you can’t afford in the hopes that interest rates will drop in the near future and allow you to refinance.

We created several awesome tools on our website to help you think through some of these big life decisions. Check out our home-buying calculator to determine how much house you can afford based on your income and current interest rates. If you are looking to buy a car, give our car-buying calculator a go.

Nobody likes high inflation, and anyone taking out a mortgage now probably feels sick to their stomach that they are getting a rate in the 6s or 7s instead of the 2s or 3s of a few years ago. At The Money Guy Show, we strongly believe that you can build wealth and make smart financial decisions even in less than ideal periods of high inflation, and we are committed to giving you the tools to help you along the way.

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Want to know what to do with your next dollar? You need this free download: the Financial Order of Operations. It’s our nine tried-and-true steps that will help you secure your financial future.