If You're Worried Inflation Will Wreck Your Retirement, Here Are 3 Must-Dos

Inflation can be a serious threat to your retirement plans. And while inflation doesn't always hit people smack in the face like it does today, it can still be a problem.

Even when prices rise by relatively modest amounts, the cumulative effect over 20 or 30 years can significantly reduce the purchasing power of your savings. Expenses that seem manageable at the start of retirement, from groceries to utilities to healthcare, could consume a much larger share of your retirement income in the future.

Image source: Getty Images.

The good news is that you don't have to accept inflation as an unavoidable threat to your retirement. Here are three important moves that could give you a leg up on inflation.

1. Delay Social Security

Your Social Security benefits might play a meaningful role in your retirement income. Once you turn 62, you can begin collecting benefits at any time. If you wait for your full retirement age to arrive, you'll get your monthly benefits without a reduction.

However, if you delay your Social Security claim past full retirement age, your benefits are eligible for an 8% boost for each year you wait, up to age 70. With a full retirement age of 67, which is the case if you were born in 1960 or later, you can potentially score a 24% increase to your monthly checks.

A larger monthly benefit can be particularly valuable when inflation starts to soar. Social Security benefits receive annual cost-of-living adjustments (COLAs) that are designed to help those payments keep pace with inflation. Starting with a larger monthly benefit can mean receiving larger dollar increases over time.

Of course, delaying isn't right for everyone. Your health, life expectancy, and other factors need to be considered in your Social Security claiming decision. But if you're able to cover your expenses from retirement savings or other income sources while you wait, delaying Social Security until age 70 could make it easier to manage inflation throughout your senior years.

2. Hold the right investments

Keeping all of your retirement savings in cash or low-yielding investments might feel like the safest move. But it could expose you to substantial purchasing-power risk over time. If inflation averages 3% annually, but your savings only grow 2% annually, you're going to fall behind.

Stocks have historically provided long-term growth that outpaces inflation. Although the stock market can be volatile, a diversified portfolio of high-quality companies or index funds could help your savings keep up without exposing you to undue risk -- especially if you limit stocks to a portion of your portfolio only.

The right percentage and investment mix depends on your risk tolerance and income needs. For some people, a 65% stock allocation might work. For others, 50% may be optimal. Either way, the goal is to balance growth potential with stability so that your portfolio can support near-term and long-term withdrawals.

3. Build a flexible retirement spending plan

Even with a strategic portfolio and a boosted monthly Social Security benefit, inflation can strain your finances if your spending plan is too rigid. It's important to be flexible when costs skyrocket because a few months of cutting back could help your savings last longer.

Start by separating essential expenses such as housing, food, utilities, and healthcare from discretionary costs such as travel and entertainment. That distinction could help you identify where to adjust your spending if prices rise faster than expected or your investments underperform.

Also revisit your budget regularly. If markets decline or essential expenses surge, temporarily reducing nonessential purchases could help preserve your savings.

Inflation has the potential to erode your buying power over time. But that doesn't mean you have to sit back and let it. By delaying Social Security, choosing the right investments, and being willing to adjust your spending as needed, you can set yourself up to thrive even as costs increase throughout your retirement.

The Motley Fool has a disclosure policy.