By Elijah Nicholson-Messmer

Rising housing and healthcare costs have saddled retirees with higher-than-average inflation since late 2022, and they are projected to keep rising faster as an energy spike radiates through the economy.

The Bureau of Labor Statistics said that CPI-E, an experimental index designed to more accurately reflect inflation experienced by Americans aged 62 and older, has outpaced the standard measure of inflation used by the BLS for 40 straight months -- since November 2022. Over that period, the cost of living for retirees climbed a total 10.8%, 1.2 percentage points higher than the consumer price index.

In March, the surge in gasoline prices due to the war with Iran ended that streak, with the two measures showing equal levels of inflation -- 3.3% year over year. Workers tend to drive more than retirees. But experts say the recent inflation trend is far from over for older Americans.

CPI-E's heavy weighting in medical care and housing means retirees face a delayed hit as oil costs filter through the broader economy. Research from HealthView Services, a producer of healthcare cost-projection software, expects retirees to continue to face higher inflation than the standard index, due in large part to rising healthcare costs.

While healthcare inflation is driven by a variety of factors beyond oil prices, recent research has suggested the sector is more heavily impacted by oil price shocks than many analysts previously assumed.

But unlike gasoline prices where companies quickly pass costs onto consumers, it takes longer for consumers to see the effects of an oil price spike in their healthcare costs. Earlier research found that an increase in oil prices can take eight months to show up in medical care prices.

Financial advisors like Kevin Thompson, president and CEO of 9i Capital Group, say retirees are feeling the consequences of oil-driven inflation whether they realize it or not.

"Most retirees think oil prices just affect gas. That is not true," Thompson said. "Oil is embedded in almost everything you spend money on. And if you're retired, it hits you harder than just about everyone else."

Oil prices alone aren't responsible for the higher inflation seen in areas where retirees spend more, but experts say they have a greater impact than many Americans assume.

To show how inflation affects retirees and working Americans differently, Barron's looked at two figures for each spending category: how much prices changed over the past year, and how large a share of each group's budget goes toward that category. Multiply those two numbers together and you get each group's personal inflation impact -- measured in percentage points -- for each category.

Take healthcare as an example: Medical care prices rose about 3.1% over the past year. Working Americans spend roughly 6% of their budget on healthcare, so that price increase added about 0.18 percentage points to their personal inflation rate. Retirees aged 75 and older, however, spend closer to 14% of their budget on healthcare -- so the same 3.1% price increase hits them twice as hard, adding about 0.44 percentage points to their cost of living.

Drug prices are "deeply tied to petrochemical inputs and the energy-intensive processes that produce them," said Steve Suter, chief operating officer of MacroHealth. But inflation in some areas may lag behind the immediate inflation consumers have observed at the gas pump.

"When oil spikes, it doesn't show up on your pharmacy receipt the next week -- but it will show up," Suter said. "The lag obscures the connection, but it doesn't break it. Retirees on fixed incomes managing multiple prescriptions need to understand that today's oil prices are tomorrow's drug costs."

Researchers at the Federal Reserve refer to this phenomenon as the " second-round effect" of oil prices on inflation. The bottom line is that higher energy prices can push up the cost of groceries and other essential goods for years.

Researchers found that these indirect price hikes build gradually, peaking roughly two years after the initial oil price jump. This delayed reaction means that even if oil prices begin to fall in the coming weeks, the momentum of that initial increase will remain embedded in the economy.

For retirees living on fixed incomes, absorbing that inflation is particularly hard.

"This is a difficult environment for retirees because the pressure is very real: Higher costs for essentials, with limited ability to offset that through income growth," said Neil Gilfedder, chief investment officer at Edelman Financial Engines.

Financial advisors like Thompson say that retirees navigating the current market have to balance dueling goals in their portfolio, maintaining a cash-buffer against short-term market volatility while increasing their exposure to higher-return investments, including equities and commodities like gold and silver.

According to Thompson, the era of easy gains from money-market funds has passed. Retirees must now explore alternative investments to stay ahead of inflation. But every strategy carries its own set of risks.

As retirees allocate more of their savings toward stocks and other higher-return investments, they are also upping the risk profile of their portfolio, he said. But he added: "That's where people have to be. Or you're just going to lose out to inflation."

Write to editors@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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April 15, 2026 02:00 ET (06:00 GMT)

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