Inflation doesn’t just affect gas prices or your grocery bill—it can quietly chip away at your retirement savings over time. After decades of relatively low inflation, rates jumped in 2021 and reminded us how quickly the cost of living can rise.
If you're nearing or already in retirement,
inflation poses a real threat to your future purchasing power. Even a modest inflation rate of 3.5% could cut your buying power in half over a 20-year retirement.
So how can you protect the nest egg you’ve worked so hard to build?
Here are five practical (and smart) ways to help defend your retirement income against the rising cost of living.
1. Keep Less in Cash
It might feel safe to keep a large portion of your savings in cash or money market accounts—but over time, that can be a losing strategy. As of mid-2025, many money market accounts are still paying under 0.5%, while inflation may be running well above that. The result? Your cash loses value every year.
Tip: Keep enough cash to cover short-term emergencies—generally 6–12 months of living expenses. But invest the rest in assets that have a better shot at outpacing inflation.
2. Stay Invested in Stocks — At Least a Little
As you get closer to retirement, it’s wise to reduce risk—but not eliminate stock exposure entirely. Stocks have historically outpaced inflation over the long term, and with people living longer than ever (18–20 years or more in retirement is common), you still need some growth in your portfolio.
Tip: Work with a financial advisor to maintain a balanced, age-appropriate allocation that keeps you invested for the long haul.
3. Use Annuities to Create Inflation-Protected Income
Annuities can provide
guaranteed income for life, which can be incredibly valuable during retirement. Some types of annuities also offer
cost-of-living adjustment (COLA) riders, which increase your payments over time to help keep up with inflation.
Tip: Consider using a portion of your retirement savings to purchase an annuity with an inflation rider. You may receive a slightly lower initial payment, but it offers peace of mind and protection against rising costs.
4. Delay Taking Social Security (If You Can)
You can start receiving Social Security as early as age 62—but the longer you wait (up to age 70), the more your monthly benefit increases. For each year you delay past your full retirement age, your benefit grows by about 8%. And once you begin receiving it, your Social Security check is automatically adjusted for inflation each year.
Delaying may also help reduce how much of your benefit is taxed, depending on your income level.
Tip: If waiting feels financially difficult, consider using other assets—or income from part-time work or annuities—as a temporary bridge.
5. Don’t Overlook Real Estate
Real estate has historically been a strong hedge against inflation. It tends to rise in value over time, and rental income (if you invest in income-producing property) can also increase with inflation.
Tip: You don’t have to buy a rental home or be a landlord. Real estate investment trusts (REITs) are available through many retirement plans, including 401(k)s and IRAs, and offer exposure to commercial real estate without the management headaches.
Final Thoughts
Inflation may be a fact of life—but with the right strategies in place, it doesn’t have to derail your retirement plans. From staying invested and delaying Social Security to exploring annuities and real estate, these steps can help your money go further—no matter how long you live or how prices fluctuate.
Planning ahead is the best defense. If you’re unsure which of these options is right for you, we’re here to help you build a retirement income strategy that accounts for inflation and gives you confidence in the years ahead.
