{"id":814242,"date":"2026-07-20T13:52:12","date_gmt":"2026-07-20T13:52:12","guid":{"rendered":"https:\/\/www.newsbeep.com\/ca\/814242\/"},"modified":"2026-07-20T13:52:12","modified_gmt":"2026-07-20T13:52:12","slug":"inflation-is-coming-for-your-retirement-plan-heres-how-to-fight-back","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ca\/814242\/","title":{"rendered":"Inflation Is Coming for Your Retirement Plan. Here’s How to Fight Back."},"content":{"rendered":"

Inflation, sequence of returns, unexpected early retirement, and long-term care costs pose serious risks to today\u2019s retirees. At the 2026 Morningstar Investment Conference<\/a>, I talked about those retirement shocks with Dana Anspach<\/a> of Sensible Money and Michael Finke<\/a> of The American College of Financial Services. Today\u2019s excerpt from that panel focuses on inflation and how to prepare for it.<\/p>\n<\/p>\n

How to Account for Inflation Shock in Your Retirement Plan<\/p>\n

Christine Benz: I wanted to start with one that\u2019s top of mind for many people, certainly retirees, which is inflation, and that we\u2019ve seen higher costs. Dana, I\u2019d be curious to get your experience with clients through inflationary periods. You\u2019ve observed in the past that you don\u2019t see your clients necessarily requiring spending increases in line with inflation. Can you talk about that?<\/p>\n

Dana Anspach: We do see people follow the pattern of go-go, slow-go, no-go. And so, in the go-go phase, often, spending is high, and we\u2019ve planned for that. We built in extra spending, and we\u2019re taking a set of baseline expenses and assuming it\u2019s going to go up each year, typically 3% for living expenses, 5% for healthcare-related expenses. All of that is baked into their cash flow planning, the amount of money we say that they\u2019re going to need each year. But where I often see people not needing the inflation increases is in the slow-go phase.<\/p>\n

They will travel and do a lot of extra things in the first five, sometimes 10 years of retirement, but usually around the mid-70s, people do slow down, and we\u2019ll say, \u201cAll of your plan metrics look solid. We have an inflation raise built in. We can increase your direct deposit from X to X.\u201d And they\u2019ll say, \u201cYou know what? I\u2019m not even spending what you\u2019re sending already.\u201d And so that is not uncommon for us to hear in those later phases of retirement. I would say in the earlier phases, especially the past few years, people are like, \u201cYes, I\u2019ll take that.\u201d And so, we increase their direct deposits, and it\u2019s very reassuring for them to know that that\u2019s already built in and part of the plan.<\/p>\n

The Scenario Where You Might Have to Save 20% More<\/p>\n

Benz: I\u2019d like to talk about sequence of inflation risk because we often talk about market returns in the context of sequence risk. Michael, can you talk about when inflation occurs in someone\u2019s retirement lifecycle and how much that matters? Wade Pfau<\/a> has described that as sort of another form of sequence risk.<\/p>\n

Michael Finke: It is. Let\u2019s imagine two scenarios, both of which have exactly the same average inflation in retirement. One, you have inflation of 5% per year for the first five years and then 2% for the remainder of retirement. The other scenario, you have 2% inflation for the first 15 years and 5% for the last five years. In the first scenario, you have to save up almost 20% more for retirement because when prices go up earlier in retirement, they remain high for the remainder of retirement. And as Dana\u2019s pointing out, you tend to spend more early on in retirement. If you get hit early on in retirement with high inflation, which a lot of recent retirees have, and who knows what\u2019s going to happen in the future, it\u2019s every bit of a risk as market risk. And just like market risk, it tends to be most acute and matters the most early on in retirement.<\/p>\n<\/p>\n

The Best Way to Hedge Against Inflation Risk to Your Retirement Portfolio<\/p>\n

Finke: Let\u2019s take a moment and talk about the best way to hedge against inflation risk because I feel like I need to get on my soapbox here and say the same thing I do over and over again, especially for healthy, higher-income workers. The single best way to hedge against that risk is to delay claiming Social Security. It is for, let\u2019s say, mass affluent retirees for whom Social Security still represents a decent percentage of their spending. Delayed claiming of Social Security is really the most reliable way to get both inflation protection and longevity protection. And you can bridge that with investments during that period, and you can even bridge it with a lot of investments during that period.<\/p>\n

You don\u2019t have to reduce your spending by delaying claiming Social Security because you can actually spend more throughout retirement. But to me, that\u2019s one of the most underutilized strategies. And even with all the negative news we\u2019ve heard about Social Security recently, it still makes sense even in a worst-case scenario, which is never going to happen politically.<\/p>\n

Know where you stand before you retire. Investor X-Ray provides a clear view of your portfolio\u2019s diversification and risk exposures.<\/a>Annuities: You Can Make an Inflation Adjustment Yourself<\/p>\n

Benz: I want to follow up on that, Michael, because I\u2019ve heard Social Security explained as kind of the best annuity that money can buy because it has that built-in Consumer Price Index adjustment, it has all of those beautiful features. But if you\u2019re to buy an annuity, you cannot get an annuity with a CPI adjustment, and that\u2019s often kind of trotted out as a reason to not annuitize. Can you address that? Because I know you\u2019re a fan of annuities, but what about the inflation rate?<\/p>\n

Finke: Sometimes I\u2019ll hear people say that, and I\u2019ll ask them, \u201cWell, what does your bond portfolio look like?\u201d And they\u2019ll say, \u201cWell, maybe it\u2019s 5% TIPS or 10% TIPS or no TIPS.\u201d And I\u2019m like, \u201cWell, you don\u2019t have the inflation adjustment in your bond portfolio. Why would you expect an insurance company that is investing in the same types of corporate bonds to be able to offer that type of inflation adjustment?\u201d You can make an inflation adjustment yourself if you want to by, say, starting out with a base of income and then you can have a delayed annuity that begins at the age of 85, maybe have another one that begins at the age of 75. You can create an upward-sloping spending path with your lifetime income. However, it\u2019s not very practical for insurance companies to offer that inflation protection unless they\u2019re creating annuities using Treasury Inflation-Protected Securities, and those tend to be very expensive.<\/p>\n

The other reason why it probably doesn\u2019t matter as much is if you\u2019re delaying claiming Social Security, then, as Dana said, oftentimes later in retirement, we\u2019re not spending as much after inflation as we were earlier on in retirement. Naturally, if you have sort of a base of Social Security and you have whatever form of income on top of that that\u2019s not inflation-protected, that\u2019s going to actually look pretty much like the way people actually spend money in retirement.<\/p>\n<\/p>\n

An Alternative to TIPS: An Income Ladder<\/p>\n

Benz: Dana, you have an interesting perspective on TIPS as a component of your clients\u2019 bond portfolios. You don\u2019t typically carve out an allocation to TIPS. Can you talk about that and what you do instead?<\/p>\n

Anspach: We use a form of what\u2019s called an income ladder. It\u2019s a specific type of bond ladder that falls under the asset-liability matching investment approach where we\u2019re laying out a client\u2019s cash flows typically for the first five to 10 years of retirement. I mean, we\u2019re laying them out for all of retirement, but I would say they\u2019re less accurate the farther out you go. And then we\u2019re buying bonds that mature in the amounts of those cash flows that we\u2019ve specified, and we\u2019ve already built inflation into that spending. Their purpose in our portfolio structure is that we\u2019re never going to match spending exactly. It\u2019s creating a floor. So, an event like 2022 for us was a nonevent. We had bonds maturing that year that covered most of the clients\u2019 needed spending. We don\u2019t have to sell anything that was down in value when those bonds mature; they\u2019re part of that consumption plan, and then periodically, we\u2019re selling equities to replenish that bond ladder on the long end.<\/p>\n

And so, it\u2019s just one of many ways of approaching portfolio construction. I know other people prefer to build their bond ladders particularly with TIPS. In our case, we want to be approximately right. We\u2019re never going to match the spending exactly with our income ladder, but we just want that layer of risk protection. It also behaviorally impacts the client knowing, \u201cI have these bonds maturing. I know it\u2019s going to cover most of the spending I\u2019m going to need that year. I don\u2019t have to stress if the equity markets are down or even if both are down at the same time.\u201d<\/p>\n

Valentina Djeljosevic contributed to this article. <\/p>\n

Explore more retirement insights How to Use TIPS in Your Portfolio <\/p>\n

Treasury Inflation-Protected Securities can hedge inflation, manage risk, and protect retirement income.<\/p>\n

\"amy<\/a>Your Retirement Countdown, With Christine Benz <\/p>\n

Whether retirement is 25 years away or less than a year out, Morningstar\u2019s Christine Benz shares the essential planning priorities for every stage of your retirement countdown.<\/p>\n

\"alt=""\"<\/a>How to Retire: Tips for Entering Retirement <\/p>\n

Morningstar\u2019s Christine Benz explores the keys to a healthy, happy, and wealthy retirement in her book and podcast series.<\/p>\n

\"Photo<\/a>Dana Anspach and Fritz Gilbert: \u2018This Is What a Joyful Retirement Could Feel Like\u2019 <\/p>\n

A financial advisor and retirement blogger discuss the key phases of retirement, structuring portfolios for drawdown, and how retirees can give themselves \u2018permission to spend.\u2019<\/p>\n

\"Collage<\/a>Dana Anspach: How to Build an All-Weather Retirement Plan <\/p>\n

A noted financial advisor shares how she helps clients manage sequence risk, high inflation, and the wild card of long-term care.<\/p>\n

\"Collage<\/a>Adam Grossman: Asset Allocation Is an Investor\u2019s Best Defense <\/p>\n

A flat-fee financial advisor and columnist discusses why less complicated portfolios are usually best, how he addresses inflation risk in client portfolios, and his biggest worry for new retirees.<\/p>\n

\"Collage<\/a>Bill Bengen: \u2018Inflation Is the Greatest Enemy of Retirees\u2019 <\/p>\n

The author and creator of \u2018the 4% rule\u2019 discusses the pros and cons of various withdrawal strategies and key risk factors facing retirees today.<\/p>\n

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