free tool that can match you to a fiduciary adviser<\/a>, from our ad partner SmartAsset, as well as resources like NAPFA and the CFP Board \u2014 but you can also do a lot on your own. Here\u2018s what 10 financial advisers and certified financial planners say you should do to prepare for inflation when you are retired. <\/p>\nStart your planning now \u2014 not after you\u2019ve already retired.<\/p>\n
Most pros we talked to said the best way to plan for inflation in retirement is to start your planning well ahead of when you actually want to retire. \u201cEarly planning is always the best way to prepare, which is the combination of future income and expense projections, estimated portfolio growth rates and tax estimations. Proper coordination of these items can limit the overall burden of inflation in retirement because it\u2019s already been accounted for,\u201d says Kaylee McClellan, CFP and financial adviser at Innovative Planning Group.<\/p>\n
Make sure you have multiple income streams that adjust with inflation or give you flexibility to adapt. <\/p>\n
\u201cYou can prepare for it better than most people realize, but it requires planning while you\u2019re still working, not after you\u2019ve already retired. The key is building multiple income streams that either adjust with inflation automatically or give you flexibility to adapt,\u201d says Josh Katz, CPA and founder of Universal Tax Professionals.<\/p>\n
Work longer. <\/p>\n
\u201cBuild equity exposure into your retirement portfolio. Stocks have historically been the best long-term hedge against inflation even though they\u2019re volatile in the short run. And honestly, one of the best hedges is working a few extra years if you can. The combination of more savings, delayed Social Security and a shorter retirement period to fund makes you much more resilient to whatever inflation does,\u201d Katz says.<\/p>\n
Diversify your portfolio.<\/p>\n
\u201cConsider maintaining a diversified portfolio that includes assets with long-term growth potential, rather than relying too heavily on cash or low-yield holdings,\u201d says Sam Merrick, financial planner at Horizon Financial Services. \u201cIn some cases, it may also make sense to consider tools such as Treasury Inflation-Protected Securities, or TIPS, as part of a broader strategy to help address inflation risk.\u201d<\/p>\n
Consider investments that keep pace with inflation.<\/p>\n
\u201cInflation is basically things costing more over time. If your groceries cost more, if your utilities cost more, if your trips to see your grandkids cost more, then you may have to dip deeper into your retirement assets than you originally planned or cut back on your spending. In retirement, I\u2019ve yet to find anyone who wants to cut back on spending, so making your retirement assets do more for you is key,\u201d says Eric Mangold, certified wealth strategist and founder of Argosy Wealth Management.<\/p>\n
That may mean certain types of investments. \u201cConsider allocating to investments in a portfolio that do a decent job keeping up with inflation, especially over the long run. Note, investments that do well when considering inflation aren\u2019t always the same assets that do well when ignoring inflation, which is why an efficient retirement portfolio could look a little different than an efficient accumulation portfolio,\u201d says David Blanchett, PhD, CFA, CFP and head of retirement research at Prudential.<\/p>\n
Make adjustments when you need to.<\/p>\n
\u201cA 60\/40 portfolio may have to be adjusted for more growth to offset the impacts of inflation. For security, investing in CDs or fixed accounts can help, but for others, it may not keep up with the raising prices,\u201d says Azoury.<\/p>\n
Consider delaying Social Security.<\/p>\n
\u201cConsider delayed claiming of Social Security retirement benefits. Social Security retirement benefits offer lifetime income explicitly linked to inflation,\u201d says Blanchett.<\/p>\n
Jon Beyrer, CFP, senior financial adviser and principal at Blankinship & Foster LLC, says that delaying benefits from Social Security can actively protect against high inflation before it happens. \u201cAn important way to protect against high future inflation is with Social Security delayed retirement credits. That is, delaying the start of Social Security benefits so you will have a higher inflation-linked income later in life.\u201d<\/p>\n
Create practical projections for the years to come.<\/p>\n
\u201cWe create multiyear projections of their expenses in retirement, and we itemize areas where they can influence the cost to them. Examples are: income taxes, healthcare, long term care, housing,\u201d says Beyrer.<\/p>\n
Breanna Stott, CFP & CEO of Finwell, Inc., agrees, and even models out different scenarios for clients to truly put their financial plans to the test. \u201cWe stress test our clients\u2019 plan to include an increased inflation assumption, lower market return assumptions, a longer lifespan and lower Social Security benefits. If our clients\u2019 plan is still within a successful range, we consider it a success.\u201d<\/p>\n
Flexibility and growth in your plan is key.<\/p>\n
\u201cThe people who handle it best have flexibility. They have assets that can grow, income that can adjust and a plan that protects their purchasing power over time. You can\u2019t predict inflation, but you can absolutely prepare for it,\u201d says Pamela Garret, estate planning attorney and wealth strategist at The Law Mother.<\/p>\n
Garret also notes not to count out growth in your retirement years. \u201cFirst, keep growth in the plan. Even in retirement, part of your money needs to stay invested in assets that can outpace inflation over time. Second, build multiple income streams. Relying on just Social Security or a pension creates risk. Flexibility matters. Third, be intentional about taxes and withdrawals. Keeping more of what you earn becomes even more important when costs are rising,\u201d she notes.<\/p>\n
Save money where it makes sense.<\/p>\n
\u201cMost people fail to consider their own physical aging and various alternative living arrangements that can help them live better and longer. The amount of financial resources needed to stay in your home until your last breath depends on the maintenance and upkeep demands of the home itself,\u201d says Mary Brimer, chartered life underwriter, chartered financial consultant and financial planner at Ginger Green Financial.<\/p>\n
\u201cMany homeowners fail to take advantage of downsizing (house size and\/or expense) when opportunities present themselves. Multigenerational living arrangements and various types of retirement communities offer significant benefits in the \u2018slow-go\u2019 and \u2018no-go\u2019 years of retirement. These benefits include financial, social and safety.\u201d<\/p>\n
\u201cThe goal isn\u2019t just to retire. It\u2019s to keep your lifestyle once you get there. Inflation is one of the biggest threats to that, but with the right plan, it\u2019s manageable,\u201d Garret says.<\/p>\n
Work with an adviser or a financial professional that you trust<\/p>\n
\u201cThe best way to prepare for retirement, with different inflation projections, is to run a financial plan and work with a certified financial planner,\u201d Stott says.<\/p>\n
\u201cWe say DIY projects are for the weekends \u2014 don\u2019t DIY your retirement. Consult with a trusted financial professional who can help you with a custom retirement income strategy that addresses inflation as well as things like taxes, healthcare, etc.,\u201d Mangold says. You can use this free tool that can match you to a fiduciary adviser<\/a>, from our ad partner SmartAsset, as well as resources like NAPFA and the CFP Board.<\/p>\n","protected":false},"excerpt":{"rendered":"Roughly 1 in 4 Americans say this is a \u2018burning\u2019 question they have about retirement: \u201cwhat if inflation…\n","protected":false},"author":2,"featured_media":605443,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[8786,64,63,99,31347,31359,31342,13448,61155,174808,186,203997,13634,482,55129,31360,105064,294682,4631,5476,202795,5475,203998,10299,184,185,21298,31345,294683,204004,6541,2954],"class_list":{"0":"post-605442","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-advice","9":"tag-au","10":"tag-australia","11":"tag-business","12":"tag-content-types","13":"tag-corporate","14":"tag-corporate-industrial-news","15":"tag-economic-news","16":"tag-economic-performance","17":"tag-economic-performance-indicators","18":"tag-finance","19":"tag-financial-investment-services","20":"tag-financial-services","21":"tag-general-news","22":"tag-indicators","23":"tag-industrial-news","24":"tag-inflation-figures","25":"tag-inflation-figures-price-indices","26":"tag-insurance","27":"tag-investing","28":"tag-investing-securities","29":"tag-investment-advice","30":"tag-investment-advice-research-services","31":"tag-life-insurance","32":"tag-personal-finance","33":"tag-personalfinance","34":"tag-political","35":"tag-political-general-news","36":"tag-price-indices","37":"tag-research-services","38":"tag-retirement-planning","39":"tag-securities"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/605442","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=605442"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/605442\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/605443"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=605442"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=605442"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=605442"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}