How to Protect Your Multi-Decade Retirement from Inflation

If you're worried about inflation and how it might potentially wreck your retirement, you're not alone. In fact, a recent report from Gallup showed that as of April, inflation was the most named financial problem facing families -- cited by 29% of respondents. That's down a lot from 41% in 2024, but it's still the top concern, ahead of housing costs and a lack of money.

It's a worthy concern. Consider this: Prices have risen by about 288% since 1980, meaning that what cost you $1 in 1980 would cost you around $3.88 in 2025. If inflation stays around 3%, which is roughly its long-term average, it can cut the purchasing power of your portfolio in half within 25 years. Ouch!

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Here, then, are some ways to protect your retirement -- which could last 20 or 30 years or more -- from inflation.

Image source: Getty Images.

1. Have an emergency fund

First, be sure to have an emergency fund that can carry you through at least a few months of non-employment. Even if you remain employed, you might have a major unexpected expense rear its ugly head, such as a big car repair -- and you don't want to remove any money from your retirement accounts, where those dollars are busy growing for you.

2. Aim high with your retirement goals

Next, consider increasing the size of the nest egg you're aiming to build. Remember that if a million dollars seems sufficient now, if you're retiring in 20 years, a million dollars won't be what it used to be. For some people, $2 million might be a better goal. Take some time to figure out how much you might need to retire with in the future.

That $2 million goal can be attainable if you sock money away aggressively and have enough years ahead of you.

Source: Calculations by author.

3. Consider delaying retirement a bit

One way to beef up your retirement nest egg is to delay retiring for a few years. Check out the table above. If you can get to $741,344 in 20 years, delaying retirement by five more years while continuing to save and invest might get you to nearly $1.2 million. This strategy also means a shorter retirement, which can help you not run out of money.

4. Include dividend payers in your portfolio

Investing in dividend-paying stocks can be a powerful move. Healthy and growing dividend-paying companies tend to increase their payouts, often annually, and those increases can help you keep up with inflation. Their stock prices should appreciate over time as well. It's a win-win!

You don't even have to become a stock market genius -- as you can just opt for one or more dividend-focused exchange-traded funds (ETFs), which make dividend investing easy.

5. Consider I-bonds

You might also consider investing in I-bonds, which feature inflation-linked interest rates. Treasury Inflation-Protected Securities, or "TIPS," are another possibility, as they feature inflation adjustments. These are not likely to be big growers, but they can protect the purchasing power of the income you get.

6. Consider REITs

If you're seeking income from your portfolio, which is a smart move for retirees, you might want to look for real estate investment trusts (REITs) -- companies that own lots of properties and earn income by renting them out -- because they're required to pay out most of their income in dividends. Owning a REIT-focused ETF can be a good move, too. Perhaps check out the Vanguard Real Estate ETF or the JPMorgan Realty Income ETF.

7. Favor stocks whose companies can raise prices

If you're investing in individual stocks, give some thoughts to the companies behind the stocks. Consider favoring those that can get away with raising prices, as that can help them and their shareholders keep up with inflation.

Industries that often engage in price wars will not fit this bill, but companies with strong brands are often able to hike prices successfully, because people want those brands.

8. Keep some money in "safer" investments when interest rates are high

When you're retired, you can still keep a meaningful portion of your portfolio in stocks, as much of your money will still have many years in which to grow. But it's also smart to keep several years' worth of living expenses in "safer" and less volatile places, such as certificates of deposit (CDs), high-yield savings accounts, and money market accounts. This is especially true right now, when interest rates are still relatively high and you might find rates of 4% or more, which will often outpace inflation.

9. Consider maximizing your Social Security benefits

One of Social Security's best features is that it includes nearly annual cost-of-living adjustments (COLAs). To maximize those increases, you might try to maximize your benefits. An increase of, say, 4% will be higher on a $2,500 monthly benefit than a $2,000 one. Be sure to think through the issue of when to claim your benefits, because the best age at which to collect is different for different people. (It's age 70 for most folks, though.)

10. Have multiple income streams in retirement

Finally, aim to have multiple retirement income streams, so if one is particularly affected by inflation, you may rely more on another. These streams may include Social Security, dividend income, annuity income, rental income, and other potential incomes.

However you do it, do have a retirement plan in place, and do prepare for the effect of inflation over time.

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Selena Maranjian has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard Real Estate ETF. The Motley Fool has a disclosure policy.