Inflation Is Back Above 3%. Here's the Retirement Income Strategy That Holds Up Best.

For many people, planning for retirement means figuring out what their expenses will look like and contributing regularly to an IRA or 401(k) plan. But there's an important thing you must factor into your retirement calculations -- inflation.

This especially holds true for retirees today. In March, the Consumer Price Index rose 3.3% on an annual basis. That increase was largely fueled by rising oil prices stemming from the Iran conflict.

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If the conflict overseas settles down, oil prices could start to come down, allowing inflation to cool from where it is today. But even if that happens, it could easily start to creep back up.

Now to be clear, in historical context, inflation in the 3% range isn't extreme. But it is something you need to plan for carefully. Here's how to map out a retirement income strategy that can hold its own in the face of inflation.

Choose the right investments for your retirement portfolio

During retirement, you may need your IRA or 401(k) to provide a good chunk of your income. It's important to set up your portfolio to beat inflation, or at the very least keep up with it, so you don't have to worry about covering your bills.

To that end, choose your assets wisely. You don't want to overload on stocks due to the risk factor. But it's generally a good idea to keep about 50% to 60% of your portfolio in stocks for the growth potential. That could mean owning shares of different companies across a range of market sectors or investing in an S&P 500 (SNPINDEX: ^GSPC) or total stock market ETF.

To protect yourself from having to sell stocks at a loss during market downturns, keep the remainder of your portfolio in assets that are more stable, like bonds. Bonds are an especially good bet since they can serve as a source of steady income.

It's also a good idea to keep at least two years' worth of living expenses in cash. The return you get on cash, even in a high-yield savings account, may not beat inflation in the long run.

But that's not the goal. Rather, it's to have a way to pay your bills for a while if your portfolio needs time to recover from a market downturn. So even if interest rates fall from where they are today and you don't end up earning much on your cash, it's still an important thing to have.

Delay your Social Security claim

In addition to withdrawals from your retirement account, your Social Security benefits might provide a big chunk of your income for your senior years. And if you're willing to delay your Social Security claim until age 70, you can lock in better inflation protection.

You're eligible for your Social Security benefits based on your earnings history when you reach full retirement age. If you were born in 1960 or later, that happens at age 67. But for each year you delay your Social Security claim past full retirement age, your benefits get a permanent 8% boost.

Meanwhile, Social Security benefits are eligible for a cost-of-living adjustment (COLA) every year that's tied to inflation directly. But the larger your benefits are to begin with, the more valuable those annual raises are apt to be, thereby layering on more protection against rising costs.

And remember, if you can't delay your claim until age 70, waiting even one year past full retirement age results in a boost. That could be extremely helpful in its own right.

Inflation is something everyone should be mindful of in the course of retirement planning. By investing your money strategically and delaying Social Security for larger monthly checks, you can set yourself up to beat inflation and, ideally, avoid years of financial worries.

Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.