How to Protect Your Retirement from Inflation

How to Protect Your Retirement from Inflation

Are you living comfortably in retirement, or do the latest news headlines have you concerned about your future?

With inflation the highest it’s been in 40 years, 70% of Americans consider it a big deal, according to a recent Pew Research study, so it’s no wonder you might be concerned about your retirement. Another recent study determined that adults of all ages are delaying major life events, with some postponing retirement by a few years and others holding off on marrying or starting a family.

While most Americans hold a grim outlook on the state of our economy, experts say it’s performing better than people think. Despite market volatility, job security remains strong, and homeowners are experiencing record wealth from the rise in real estate equity.

We can see why you might be rethinking your investment plans, but staying calm and maintaining your contributions is essential. Whether you’re a pre-retiree or a few years into retirement, you can take steps to mitigate the challenges that inflation presents.

First, let’s discuss how inflation could affect retirees.

As inflation rises, it reduces the purchasing power of your savings, which could, in turn, increase the cost of your future expenses. If your expenses exceed your planned income, you risk running out of money.

On the other hand, older adults don’t have the same expenses as younger adults and may not be as impacted by inflation. Because most retirees own their own homes and spend less time commuting, they’ll remain insulated from rising housing and fuel prices.

In fact, retirees may end up benefiting from inflation. Read on as we share methods to protect your retirement from – or find opportunities in – an inflationary economy.

Protect your retirement savings from sustained inflation

Inflation may be at decades-high levels, but avoid deviating too far from your long-term investment plans. Instead, take the following steps to protect your savings.

Inspect (and adjust) your budget

Review your fixed (housing, utilities, phone, cable, insurance, etc.) and variable (groceries, vacations, dining, entertainment, clothing, etc.) expenses. To determine whether you’re operating in a deficit, total all costs and deduct them from your monthly income. If the number is negative, review your variable expenses and cut or reduce them as needed. If you are operating in a surplus, consider reallocating the funds. Even if your budget hasn’t been affected by inflation, you might consider trimming discretionary expenses or picking up part-time work.

Keep contributing and stay diversified

If you’re not running in a deficit, continue to furnish your retirement plan. Purposeful asset allocation and diversified portfolios (think stocks, bonds, and commodities) will balance risk while allowing you to maintain your purchasing power over time.

Monitor your cash reserves

In an emergency, it’s best not to tap into equities or assets but rather utilize cash reserves. Having 3-6 months of cash helps to cover unavoidable and surprise expenses; however, as inflation takes its toll, your purchasing power decreases, so experts suggest investing additional cash.

The potential upside of inflation for retirees

While alarmist headlines report on the devastation of inflation, some retirees might experience fortuitous benefits.

Social Security

One benefit of surging inflation is that those collecting Social Security benefits will receive, on average, an additional $150 per month in 2023. That’s because Social Security benefits are reviewed and adjusted once a year.


As prices rise across the board, homeowners remain locked into what is likely their most significant monthly expenditure – their mortgage – which helps to stabilize their monthly expenses. Mark Cussen, Financial Writer at Investopedia, says: “Real estate is one of the time-honored inflation hedges. It’s a tangible asset, and those tend to hold their value when inflation reigns, unlike paper assets. More specifically, as prices rise, so do property values.”

Roth Conversion  

If you’ve been considering a Roth IRA conversion, now might be the time to do it. Specifically, a conversion during a market downturn can substantially reduce your tax burden. As always, we recommend weighing up-front costs and consequences by consulting with a financial expert before making any significant changes.

We’ve said it before, and it bears repeating – inflation happens. It’s a risk every investor will experience at some point in their life. But prepared with the right mindset, tools, and experts at your back, you’ll get through this phase of life, too. Until then, continue to enjoy your golden years! After all, you worked hard to get here.


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More About the Author: Sheena Hanson

Sheena is a highly regarded financial professional known for her clear explanations and practical advice on complex financial matters. She earned her CERTIFIED FINANCIAL PLANNER™️ designation in 2010 and holds a Bachelor of Science degree in Finance from the University of Wisconsin LaCrosse.