Retirement Under Pressure: How to Safeguard Your Assets From Inflation's Bite

Like many nearing retirement age, I find myself concerned about finances. My primary fear is this: What happens if inflation rises at an unprecedented rate and the market crashes, cutting our portfolio in half?

However, that's where a book I read years ago by motivational speaker Dale Carnegie comes into play. It's called, How to Stop Worrying and Start Living. Although the book was first published in 1948, portions still resonate. For example, Carnegie suggested a three-step plan for dealing with stress.

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Here's a paraphrased version of his advice:

1. Ask yourself: "What's the worst that can happen?" For me, it's a market crash or inflation so high that our buying power is reduced to dust.
2. Accept that the worst could happen: While the odds of a total market crash are low, I must accept that it could happen.
3. Make a plan for what you would do if the worst were to happen: Don't sit back and wait. Instead, put a plan into place, concentrating on what I can control.

Utilizing Carnegie's suggestions, I've put a plan in place. If you'd like to do the same, consider the following:

Create multiple sources of income

Rather than relying on a single income source, create multiple income streams. For example, my husband and I will each receive Social Security, and he also has a small pension. My desire is to work until I'm well past retirement age, so we'll have that income as long as it remains possible.

Make systematic withdrawals

If your guaranteed income won't cover your bills, draw from a retirement account, such as a 401(k) or an individual retirement account (IRA). The key is to balance your current financial needs with the need to preserve your long-term portfolio. You do that by adjusting your annual withdrawal rate in response to market performance.

Add dividend-paying assets

Quality dividend stocks and funds (like these dividend-paying ETFs) can provide you with other income streams. While a stream may fluctuate depending on how a company performs, dividend-paying stocks and funds can provide you with a steady source of income and the potential for continued growth.

Opt for inflation-protected investments

Because inflation is one of my primary concerns, I'm addressing it by protecting our purchasing power. For example:

Invest in Treasury Inflation-Protected Securities (TIPS)

These U.S. government bonds are designed to protect investors against inflation by adjusting their principal value in response to changes in the Consumer Price Index (CPI). In other words, they increase with inflation and protect against rising prices. And since they're backed by the U.S. government, they're considered low risk.

Add dividend growth stocks

Shares in corporations that regularly increase their dividend payouts. Because these companies consistently raise dividends to keep pace with inflation, dividend growth stocks can be a great hedge against inflation.

Own fractions of real estate through REITs

REITs are companies that own, operate, or finance income-producing real estate. They typically pay out most of their taxable income as dividends to shareholders. One really nice thing about REITs is that they often behave differently from stocks and bonds, helping you diversify your portfolio.

There are no guarantees in life, but, like having plenty of life preservers onboard a boat or keeping a fire extinguisher under the kitchen sink, I feel better knowing I'm doing what I can to protect our retirement assets.

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