How to Protect Your Retirement During Inflation

Many retirees are on fixed or semi-fixed incomes and a major increase in the cost of goods and services they purchase can put a squeeze on their monthly budget. For those nearing retirement, high inflation can impact their ability to maximize their retirement savings in their 401(k) or an IRA.

How inflation and market volatility are impacting retirement savings

A recent survey of investors nearing and in retirement highlighted several concerns:

  • The impact of inflation lessening the value of their retirement assets was cited as a concern by 65% of the respondents.
  • Inflation leading to higher than expected healthcare costs was cited by 64% of those responding.
  • A major market downturn that would erode the value of their retirement savings was cited as a major retirement concern by 53% of the respondents.

Retirement plans like 401(k)s and IRAs can be impacted by inflation. Depending how your money is invested, your investments may be more or less susceptible to the impact of inflation based on how your account is allocated. Inflation may hinder the ability of some participants to contribute as much as they would like to their plan.

If a retirement plan sponsor offers an annuity as a distribution option from a 401(k) or other defined contribution plan, they should be sure to educate participants about the fact that the annuity payments will not be increased with a cost of living adjustment like Social Security or some public pension plans.

The same applies to defined benefit plans. With the exception of some pensions from public and governmental employers, payments from annuitizing a pension generally do not increase over time due to inflation. This can serve to erode the value of these pension payments over time. This might be a reason for some employees to consider a lump-sum payout if offered by the plan.

How can I protect my retirement money from inflation?

There are a number of ways that investors can help shield their retirement savings from the impact of inflation. Here are a few suggestions.

  • Consider delaying claiming Social Security. Not only does the amount of your benefit increase for every year that you wait after age 62 up to as long as age 70, but the cost of living increase for 2023 is expected to be one of the largest in history. This is on the heels of a hefty increase for 2022.
  • Invest in stocks. While some companies will certainly see their earnings impacted by inflation, overall stocks are traditionally a good hedge against inflation over time. Certainly, stock selection is important here when individual stocks are used along with or instead of equity mutual funds and ETFs.
  • Fixed income investments are getting hit not only with inflation but also with higher interest rates as the Fed raises rates to help combat inflation. Investors should consider using TIPS which adjust their interest rate along with inflation. At a smaller level, I-Bonds are offering a very high rate of interest, however the amount that can be purchased from the Treasury each year is quite low.
  • Real estate has traditionally been a hedge against inflation over the long-term. While the hot real estate market has shown some signs of cooling off in some parts of the country of late. Investment real estate, such as a rental unit can offer the benefits of real estate in fighting inflation and a stream of income from the rental payments.
  • Hard assets such as gold and precious metals have also been a traditional hedge against inflation. Owning gold as a metal has its challenges such as ensuring that you have a safe arrangement for storage and that the metal is purchased through a reputable dealer. In today’s market there are gold ETFs and other options that investors can consider.
  • Note that non-traditional assets such as gold and real estate can be held in self-directed retirement plans at some custodians.
  • For those who are working and have access to one, a health savings account (HSA) can be a great way to save for the high cost of healthcare in retirement. HSAs allow pre-tax contributions and tax-free withdrawals to cover qualified medical expenses. This can include Medicare premiums and other costs in retirement. Money contributed to an HSA can be carried over from year-to-year if not needed to cover current year expenses. Many HSAs offer an investment component as well.

Contact your Wedbush financial advisor to discuss options to help protect your retirement savings from the impact of inflation whether you are still approaching retirement or are retired. There are a number of planning and investment options to consider and your advisor can help you determine the best moves to make right now.


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These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. The information in these materials may change at any time and without notice.