Managing Inflation Risk in Retirement

Key Takeaways

• Delay taking Social Security as long as possible to maximize your initial benefit and lock in annual cost-of-living increases for life—this is the most effective inflation protection available
• Invest in Treasury Inflation-Protected Securities (TIPS) and I bonds, which are specifically designed to protect against inflation rather than relying solely on stocks
• Set aside dedicated assets and emergency funds earmarked specifically for future cost-of-living increases in medical, housing, and entertainment expenses, which typically rise faster than general inflation
• Consider purchasing annuities with built-in inflation protection features to guarantee that your retirement income keeps pace with rising costs over time
• Be realistic when calculating living expenses in retirement—account for the fact that some costs (especially medical) increase faster than others, and inflation affects different expense categories unevenly