3 Retirement Investments That Could Beat Inflation

If you're in the process of planning and saving for retirement, one thing that may have you worried is inflation. And that's understandable.

Social Security's cost-of-living adjustments (COLAs) do not tend to do a good job of standing up to inflation. For this reason, if you want to outpace inflation, you'll need the right investments. Here are three you should consider adding to your retirement portfolio.

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1. Dividend ETFs

Dividend ETFs, or exchange-traded funds, invest in companies with a strong history of paying and, in many cases, increasing their dividends. These funds often focus on stability, making them a potentially good fit for your retirement portfolio as far as risk goes.

Of course, you could also choose individual dividend stocks for your retirement portfolio. But you may find that ETFs simplify the investing process, allowing you to own many stocks by buying into a single fund.

Now you may be hesitant to put money into stocks at all during retirement due to the risks involved. But while it's generally unwise to keep most or all of your portfolio in stocks as a retiree, keeping a good 50% to 60% in stocks is a great way to continue generating income, thereby minimizing the risk of losing buying power to inflation year after year.

2. Real estate investment trusts

Real estate investment trusts, or REITs, are companies that make money through real estate portfolios. Hospitality REITs, for example, make their money by owning and operating hotels and other properties offering lodging, like extended-stay facilities. Industrial REITs, on the other hand, make money by operating facilities like warehouses and distribution centers.

REITs are required to pay out 90% of their taxable income as dividends. For this reason, they often pay higher dividends than typical stocks and can be a great choice for retirees seeking steady income that can outpace inflation.

3. High-yield ETFs

High-yield ETFs are different from dividend ETFs in that their goal is to maximize income. These ETFs often hold riskier investments than dividend ETFs and sometimes use other strategies, like selling call options, to generate income.

Because of the risk involved, you may not want to put too much of your portfolio into high-yield ETFs in retirement. But if you're able to balance this asset with more stable ones, plus keep a couple of years of living expenses on hand in cash to protect yourself from volatility, they could be a great tool for beating inflation later in life.

The right investment mix could be your ticket to maintaining your buying power in retirement. It pays to consider these tools if your goal is to live comfortably during your senior years and not have to worry about your savings falling behind.

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