Can Your Retirement Plan Stand Up to Inflation? These 2 Tweaks Might Help.

No matter how well you plan for retirement, there are surprises that could throw you for a loop. The stock market might crash unexpectedly. Your healthcare costs might increase. Or, worse yet, you could end up needing long-term care at some point.

But one hiccup you should know to plan for is inflation. Over time, the cost of living is likely to rise. And if you aren't prepared, you could easily end up losing out on buying power. These two adjustments to your retirement plan could help you avoid that fate.

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1. Choose your investments strategically

It's fairly common for retirees to reduce their stock holdings to minimize risk in their portfolios. But while it's OK to de-risk to some degree, you don't want to dump your stocks completely. Doing so could cause your portfolio to trail inflation, leading you to lose buying power and putting your savings at risk of being depleted.

If you're not comfortable holding individual stocks in retirement, buy shares of an S&P 500 exchange-traded fund (ETF). This effectively gives you exposure to the market. Or load up on dividend ETFs that generate steady income.

Stocks aren't your only option for beating inflation, though. You could also look at Treasury Inflation-Protected Securities (TIPS).

TIPS are government bonds designed to protect your money from rising prices. Their principal value increases with inflation, which can help you keep up with cost increases.

I bonds work differently but can provide similar protection. Their interest rate is pegged to inflation, so when prices rise, you're able to earn more.

2. Give your Social Security benefits a boost

While your savings could run out at some point, Social Security is guaranteed to provide you with a monthly benefit for life. And boosting that benefit with a delayed claim is a great way to score some added inflation protection.

Each year you delay your Social Security claim past full retirement age boosts your monthly benefits by 8%, up until age 70. Since those benefits are eligible for an annual cost-of-living adjustment, the larger they are to begin with, the more money each annual raise should put in your pocket, making it easier to keep up with rising costs.

Inflation isn't something you can avoid in retirement. Even if it's moderate, you need a plan to beat it. These two moves could put you in a better position to keep up with your expenses through the years and avoid long-term financial stress.

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