You Can't Escape Inflation in Retirement. Here's How to Beat It.
Key Points
Inflation could erode your buying power over time in retirement.
The right investment mix could come to your rescue.
Increasing your Social Security benefits could also offer protection.
- The $23,760 Social Security bonus most retirees completely overlook ›
When you're planning for retirement, it's important to make sure you know what your expenses might look like and that you're saving enough to cover your anticipated costs. But it's equally important to plan for inflation.
Over time, the cost of living is apt to rise. That's just a natural part of the economy. But when you're no longer working and earning wages, it's crucial to have a strategy to beat inflation so you don't fall behind financially. Here are two ways you can combat inflation in retirement.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »
Image source: Getty Images.
1. Choose the right investments
Your portfolio should be set up to beat inflation in retirement, or at least keep pace with it. To that end, it's important to stay invested in stocks during your senior years.
This doesn't mean 80% of your portfolio should be in the stock market. You don't want to expose yourself to too much risk at a time when you're probably tapping your savings for income on a regular basis. But you may want to keep around 50% of your portfolio in stocks, depending on your risk tolerance and other income streams.
Bonds are a great way to set yourself up with predictable income. But a portfolio that's 90% bonds may not keep up with inflation the way you need it to.
2. Boost your Social Security benefits
Part of what makes Social Security such a valuable income source is that it's guaranteed to pay you a monthly benefit for as long as you live. So, the more generous your monthly checks are, the easier it might be to keep up with rising costs.
Plus, Social Security benefits are eligible for a cost-of-living adjustment (COLA) every year. And the more money you get each month to begin with, the more money those COLAs should add to your checks.
If you were born in 1960 or later, you're eligible for your Social Security benefits without a reduction at age 67. But for each year you delay your claim until you turn 70, your monthly benefits get an 8% boost -- and a permanent one at that.
Inflation is an important thing to plan for in the context of retirement, right up there with healthcare, taxes, and individual retirement account (IRA) or 401(k) withdrawals. The good news is that if you have it on your radar, you can take steps to get ahead of it so you don't find yourself struggling to keep up with rising costs.
The $23,760 Social Security bonus most retirees completely overlook
If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income.
One easy trick could pay you as much as $23,760 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after. Join Stock Advisor to learn more about these strategies.
View the "Social Security secrets" »
The Motley Fool has a disclosure policy.
Recommended Articles
