Shield Your Retirement Savings: Smart Strategies to Combat Inflation

Navigating Inflation Risk in Retirement

Inflation is one of the biggest challenges you’ll face in retirement, threatening to erode the value of your hard-earned savings. As you step away from the workforce, the rising cost of living can chip away at your financial security, making it crucial to implement an investment strategy to help mitigate this risk throughout your retirement. 

What is Inflation Risk?

Remember the inflation spikes in 2021 and 2022? With inflation hitting 4.7% in 2021 and skyrocketing to 8% in 2022, many retirees felt the sting as budgets were stretched thin and financial plans were thrown off course. Inflation like this can be particularly harsh on retirees, especially those dependent on fixed incomes from pensions, annuities, or Social Security.

For retirees, inflation risk is felt in various ways—rising everyday costs, increasing healthcare expenses, and even the price of leisure activities. Without the right strategies in place, your retirement savings may not stretch as far as you need, jeopardizing your ability to enjoy your golden years.

The Challenges Ahead

Here’s why inflation risk is particularly daunting for retirees:

• Fixed Income: If your retirement income comes primarily from fixed sources, inflation can quickly outpace your earnings, making it harder to cover your living expenses. And when the Federal Reserve raises interest rates to combat inflation, bond values typically drop, hitting retirees with a double whammy.
• Healthcare Costs: Medical expenses often rise faster than general inflation, which can take a significant bite out of your budget, especially as you age and require more care.
• Market Volatility: Both the bond and stock market hate inflation. Thus, high inflation can cause your both parts of your portfolio to go down simultaneously.   Thus, it is important to have an effective game plan for dealing with inflation within your portfolio.

How to Help Protect Yourself

Despite these challenges, there are effective ways to work towards safeguarding your retirement against inflation:

• Diversify Your Investments: A well-rounded portfolio that includes stocks, bonds, real estate, and inflation-protected securities can help manage inflation risk while meeting your income needs.  Consider adding “Alternative” investments to your portfolio—these typically aren’t correlated with stocks or bonds and can offer additional diversification, helping to protect your principal during inflationary periods.
• Consider TIPS: Treasury Inflation-Protected Securities (TIPS) are designed to protect your investment from inflation, ensuring your purchasing power remains stable over time.
• Invest in Equities: While stocks can be volatile, they have historically outperformed inflation in the long run. Consider including high-quality, dividend-paying stocks or equity funds in your portfolio.
• Explore Real Assets: Real estate, commodities, and infrastructure investments can offer a natural hedge against inflation as they tend to appreciate in value over time.
• Flexible Withdrawal Strategies: Adjusting your retirement withdrawals based on market performance and inflation rates can help stretch your savings further.
• Plan for Healthcare Costs: Being proactive about healthcare planning, including considering Medicare supplements or long-term care insurance, can protect your savings from unexpected medical bills.

Take Action Now

Inflation doesn’t have to derail your retirement. With the right strategies in place, you can protect your savings, maintain your lifestyle, and enjoy a secure, fulfilling retirement. To learn more about how to safeguard your retirement against inflation, visit our website or contact us directly. We’re here to help you navigate the challenges and help build your financial peace of mind.

There is no guarantee that a diversified portfolio will outperform a non-diversified portfolio in any given market environment. No investment strategy, such as asset allocation, can guarantee a profit or protect against loss in periods of declining values.  Past performance does not guarantee future results.

This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice.  Neither Osaic Wealth, Inc nor its representatives or employees provide legal or tax advice.

Investment advisory services offered through Osaic Advisory Services, LLC member FINRA/SIPC. Osaic Advisory Services is separately owned and other entities and/or marketing names, products or services referenced here are independent of Osaic Advisory Services.