Your Retirement Plan Needs to Beat Inflation. Here's How.

You might assume that a stock market crash is your biggest risk in retirement. But even if the market is fairly good to you, there's another financial risk that needs to be on your radar -- inflation.

Over time, the cost of everyday living could rise. And if you aren't prepared to keep up with inflation, it could erode your retirement income and put you at risk of running out of savings.

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That's why it's important to have an actual plan to beat inflation. Here's what yours might look like.

It starts with the right investment mix

Thinking of dumping stocks in your portfolio to unload risk? You might assume that's the safest bet. But while doing so might minimize losses in your portfolio, it could also increase the risk that your savings will trail inflation and eventually be depleted.

A better bet? Stay invested in stocks to a modest degree.

If you're truly risk-averse and need to limit the stock portion of your portfolio to 25% or 30% so you can sleep at night, so be it. But aim to keep a decent chunk of your money in the stock market so it can continue growing.

Boost inflation-protected income streams

The money you have invested for retirement isn't necessarily guaranteed to last. But you may have certain income streams that are guaranteed not to run out, like Social Security and a pension. Boosting those income sources could give you more protection from rising costs.

With Social Security, delaying your claim past full retirement age gives your benefits an 8% boost. You can snag that boost until you turn 70.

If you have a pension with inflation protection, working longer may allow you to increase it. Whether that's an option depends on the type of pension you have, but it's worth looking into.

Consider part-time work

Even with solid investments and larger Social Security and pension checks, if you encounter a period of rampant inflation like what we saw following the COVID-19 pandemic, you may find yourself falling behind. In a situation like that, one of the best things you can do is boost your income with a part-time job or gig work.

The extra money you bring in could help alleviate financial stress and give you something to do. That's a double win.

You can't expect to avoid inflation during retirement. And you also shouldn't sit back and simply hope it won't be so bad. Rather, it's important to go in with a plan so you don't risk your finances.

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