Inflation Top Concern for Retirees in 2022

Selling an unwanted policy may ease financial burden for some seniors as rising inflation erodes purchasing power

Many seniors and retirees are entering 2022 with new optimism as they eagerly close the chapter on 2021.

According to a recent Ipsos survey conducted worldwide, people are feeling hopeful about the New Year despite rising prices and the arrival of the Omicron variant of COVID-19. Overall, most survey respondents around the globe generally felt things would be better in 2022.

But for many seniors and retirees ─ especially those living on fixed incomes ─ the economic outlook is uncertain and, in some cases, grim.

As rising inflation continues to loom, many seniors are bracing for the erosion of their purchasing power along with a projected reduction in the growth of their retirement portfolios.

One solution that some advisors are recommending to their senior clients involves selling an unwanted life insurance policy – known as a life settlement ─ and using the cash to help ease the burden of inflation.

If there was ever a time when the liquidity from selling an unwanted policy would be considered prudent and “in the client’s best interests,” that time may be now.

Outdated:  3% Inflation Model for Retirement Portfolios  

Historically, many retirement planners have used a default inflation rate of 3 percent when constructing retirement portfolios for their clients.  

Unfortunately, the rules are now changing. Recently, the Wall Street Journal reported that market forecasters are predicting much higher inflation rates coupled with lower market returns. The combination of the two will have a significant impact on the rate at which seniors spend down their retirement savings.

While the 5.9% increase in Social Security benefits starting in 2022 is the highest in four decades, inflation is climbing at a faster pace at 6.8%, according to the Consumer Price Index.

Furthermore, larger Social Security checks are not expected to offset the pressures of: (a) higher day-to-day prices, (b) the costs of Medicare Part B premiums, and (c) the taxes on benefits. (The standard Medicare Part B premium for 2022 will rise to $170.10 ─ a whopping 14.5% increase from $148.50 in 2021.)

Risky:  4% Withdrawal Rule for Retirement Portfolios

For the last few decades, financial advisors have recommended that their retired clients follow the “4% withdrawal rule” as they begin to spend down their retirement savings.

But, according to a recent report by Morningstar researchers, the 4% rule may no longer be feasible. The firm suggests that retirees should spend no more than 3.3% of their savings during the first year of retirement, and then adjust for inflation after that, regardless of the market’s performance. Morningstar researchers simulated future returns over 30 years and discovered that in about 25% of the simulations, a 50% stock and 50% bond portfolio would run out of money if withdrawals remained at 4%.

50% Lower Returns Predicted on 60/40 Retirement Portfolios

In addition to Morningstar’s guidance regarding a 3.3% withdrawal rate (versus 4%), Vanguard’s market outlook for 2022 seems to confirm that retirees will need to dial back their spending expectations due to projected slower growth in their portfolios. Vanguard notes that returns on a balanced portfolio (60% stocks / 40% bonds) are expected to be roughly half of what investors realized over the last decade.  

“Although our economic outlook calls for modestly higher inflation and normalization in interest rates over the next decade, it will not be enough to raise our returns forecast to historical averages. For this reason, our confidence in our low-return outlook has only grown stronger, and we continue to caution investors against extrapolating future results from the past.”  ─ Vanguard 2022 Market Outlook; published 12/16/21

Recent articles in the Wall Street Journal also agree that investment returns are likely to fall. The combination of higher inflation and slower portfolio growth will complicate withdrawals and force an adjustment in the standard of living for many retirees.

Cash from a Life Settlement:  Powerful Solution Against High Inflation

According to MarketWatch, financial experts believe it’s important to invest cash during high inflation. As prices for goods soar, cash will lose purchasing power and one dollar will buy less. Experts recommend investing as much cash as possible to earn a return that keeps up with or exceeds the inflation rate.

Selling your client’s unwanted life insurance policy to free up cash for new investments is an option that financial advisors and retirement planners will want to consider.

For more than 20 years, the secondary market for life insurance has provided a market forum for retirees and seniors over the age of 65 to sell unwanted or excess life insurance coverage for an immediate cash payment. In some cases, the cash payment can reach as high as 60-80% of the policy’s face value.


The reality is, no one can predict the future. But we can prepare for it. Insurance professionals and retirement planners will want to conduct an audit of their senior clients’ insurance coverage to determine whether unwanted or excess coverage can be repurposed to generate liquidity during periods of high inflation.

When the decision is made to sell a policy, obtaining the highest possible offer from institutional buyers requires the services of an experienced life settlement broker.  Agents and clients should never accept just one offer from a buyer. Be sure to entrust your client's policy to an experienced life settlement broker who has the skill to negotiate the highest possible offer among all secondary market buyers.

Asset Life Settlements has the credentials and secondary market expertise to negotiate the highest possible cash offer for your client’s policy.

Call us at 1-855-768-9085 to discuss your questions or to request a free policy appraisal. Or, feel free to use our online calculator to receive an immediate offer to discuss with your client.