3 Investments to Hold in Retirement That Could Easily Beat Inflation

Key Points

• Inflation is a major threat to a lot of people's financial security in retirement.

• You can't count on Social Security to beat inflation.

• The right investment mix could help you maintain your buying power over time without stress.

• The $23,760 Social Security bonus most retirees completely overlook ›

Although many people look forward to retirement, there's one nagging fear that's very hard to shake -- the fear of running out of money.

A recent survey by Allianz found that 64% of Americans worry more about depleting their retirement savings than actually dying. And for many people who feel that way, persistent inflation is a big factor.

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Inflation has been stubbornly elevated since the pandemic. And at this point, many workers and retirees alike are feeling stretched thin and are tired of seeing their costs continuously go up.

Now the good news for retirees is that Social Security benefits are designed to keep pace with inflation. Those benefits are eligible for an annual cost-of-living adjustment (COLA) that happens automatically.

But Social Security's COLAs have long failed to actually help seniors maintain their buying power through the years. So if you want to set yourself up to beat inflation as a retiree, it's important to set yourself up with the right investment mix. Here are three specific assets you may want to focus on.

1. Dividend stocks

The nice thing about dividend stocks is that they offer two opportunities to make money. One is share price appreciation, and the other is dividend payments themselves. Plus, dividend stocks tend to be less volatile than growth stocks, making them a suitable investment for retirees looking to minimize risk.

If you're going to invest in dividend stocks for retirement, it pays to focus on companies that have consistently increased their dividends through the years. Companies can opt to cut their dividends at any time, or stop paying them altogether. So it helps to invest in those with a strong dividend-paying history.

The income you get from dividend stocks could help you maintain your buying power as costs increase around you. It can also serve as a hedge during broad market downturns.

2. REITs

Branching out into real estate is a great way to diversify your retirement portfolio. The nice thing about REITs, or real estate investment trusts, is that they allow you to invest in real estate without bearing the risks of owning physical properties.

Plus, REITS are required to pay out at least 90% of their taxable income as dividends. And that extra income could allow your portfolio to beat inflation at a time when you need it to.

3. Growth stocks

Although growth stocks do carry a fair amount of risk, investing in them still makes sense for retirement. That's because the returns they generate could easily beat inflation, allowing you to gain an edge at a time when you're trying to live off of your portfolio.

That said, you do need to be careful with growth stocks at a time when you're actively tapping your portfolio for income. That means limiting them to a modest portion of your overall asset mix, and making sure you have plenty of less volatile assets to fall back on.

It's natural to worry about inflation wreaking havoc on your retirement finances. But with the right strategy, you can make it much less of a problem.

The $23,760 Social Security bonus most retirees completely overlook

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