For retirees, inflation can be a financial roadblock, silently reducing purchasing power year after year. In 2022, inflation peaked at 9.1%—the highest in four decades (U.S. Bureau of Labor Statistics, 2022). Rising prices can have a profound impact on retirees, especially those on fixed incomes. Here’s ways to prepare for inflation and help protect your retirement lifestyle.

1. Include Inflation-Protected Assets

Treasury Inflation-Protected Securities (TIPS) are a great option to counter inflation. These bonds are adjusted semiannually to reflect changes in the Consumer Price Index (CPI). According to the U.S. Department of the Treasury, TIPS have consistently provided returns that keep pace with inflation (U.S. Department of the Treasury, 2023).

2. Diversify with Growth Assets

While stocks carry more risk, they have historically outpaced inflation. Over the last century, the U.S. stock market has averaged around 10% annual returns, making it a solid choice for retirees looking to grow their portfolio while combating inflation (J.P. Morgan Asset Management, 2023).

3. Use the Bucket Strategy

By dividing your portfolio into three “buckets”—one for immediate cash needs, one for intermediate-term investments, and one for long-term growth—you can help ensure funds for current expenses while positioning other assets for inflation-beating growth.

4. Track Your Spending

​Regularly monitoring and tracking expenses is vital for effective retirement income management. The 2023 Retirement Confidence Survey by the Employee Benefit Research Institute revealed that many retirees experience anxiety about their financial security, with concerns about the high cost of living and reduced retirement account balances. By actively tracking spending habits, retirees can identify areas to adjust their consumption, helping to ensure their savings last throughout retirement. Maintaining a clear understanding of financial outflows enables informed decisions, aligning spending with financial goals, and enhancing overall financial security during retirement.​Preparing for inflation requires a strategic approach, but these steps can help you preserve your purchasing power throughout retirement.

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Sources:

• U.S. Bureau of Labor Statistics. (2022). Consumer Price Index Summary. Retrieved from https://www.bls.gov
• U.S. Department of the Treasury. (2023). Treasury Inflation-Protected Securities (TIPS). Retrieved from https://www.treasury.gov
• J.P. Morgan Asset Management. (2023). Guide to the Markets. Retrieved from https://www.jpmorgan.com
• Employee Benefit Research Institute. (2023). Caregivers and retirement: Findings from the 2023 Retirement Confidence Survey. Retrieved from https://www.ebri.org/content/full/caregivers-and-retirement-findings-from-the-2023-retirement-confidence-survey

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