5 Ways to Fight Inflation in Your Retirement Plan

No one wants to run out of money – or become a burden to their families. That fear is likely why many of us try so hard to save for retirement sooner rather than later. We dutifully tuck away a portion of every paycheck, max out our 401(k)s, and grab all the matching dollars we can at work.

And then we get hit by a pandemic. People lose their jobs. Some are forced into early retirement. Parts of the world shut down. Eventually, decades-high inflation rears its ugly head and interest rates are nudged up repeatedly by a governmental body trying to keep the country out of a deep recession. Then a few banks fail.

It’s a lot. The phrase “keep calm and carry on” comes to mind when we talk about how to deal with the events of the last three years. British wartime propaganda aside, the bottom line is there’s only so much we can do related to high inflation and managing our investment and retirement strategies.

Since we shouldn’t try to time the stock market – ever – it basically boils down to controlling what we can control: our discretionary spending, how long we continue to work, and how much we save consistently. Paying attention to those things is really the key to being resilient in turbulent times.

Here are some time-tested moves to focus on when it comes to your investment and retirement strategies.

1. Prioritize Paying Off High-Interest-Rate Debt

This is a good idea no matter what stage of life you are in. Start by paying off your highest interest rate debts first because they are the ones that cost the most. This is usually going to be a credit card or personal loan. Try this: Spread your credit cards out on the kitchen table. Then, make note of the interest rate you’re paying on each one. This will tell you where to make the biggest push. Once you have the debt paid off, you can move some of that extra money into investments or other retirement accounts.

2. Delay Taking Social Security

Taking Social Security at age 62 or 67 is often not ideal for those who can help it. Why? Because for every year you delay taking it until age 70, your benefit increases by about 8%. So if you take it too early, you’ll get a lower benefit and will be stuck with that lower benefit, in most cases. Visit ssa.gov to estimate your benefit amount.

3. Put Off Retirement

Another strategy is to delay retirement for as long as possible, even if it’s only another six months or a year. That gives you a little more time to allow the money in your retirement accounts to continue to grow (because you’re contributing to it), but also, potentially, to come back from a sluggish stock market.

4. Maintain a Diversified Investment Portfolio

It makes sense to have a diversified portfolio for retirement planning. Why’s that? Diversification helps ensure you don’t put all of your eggs in one basket, or consolidate your risk in one place. Having a healthy mix of investments, including real estate, hedge funds, stocks, bonds and annuities, should help reduce your risk and prove to be a smart strategy over time.

5. Consider Annuities for Fixed Costs

Annuities, which are tax-deferred investments offered by insurance companies, can give someone guaranteed monthly income in retirement. It’s no secret that people are living longer. That’s why I’m a firm believer in making sure you’ve got enough protected lifetime income – through an annuity or pension or both – to at least cover your fixed costs later in life.

With reporting by Casandra Andrews