How Retirees can Fight Inflation

Unfortunately, the threat of inflation is very real. It is more or less a given that the cost of goods and services will continue to rise and get to higher levels by the time you are ready to retire, the only uncertainly can be the extent of the increase. Financial and economic analysts try to guess at inflation rates when they forecast how much retirement income you will need to maintain your current standard of living but there is no way to really be 100% sure.

Retirees therefore need to be equipped to fight inflation if it becomes more of a problem than was predicted. The following are a few suggestions that can help.

Invest in Real Assets

To combat rising inflation levels and protect the value of your retirement assets it might be a good idea to invest a portion of your portfolio in real assets. Gold  and real estate for instance both have great track records for preserving value and are likely to keep pace if not surpass inflationary rates. The disadvantage with these instruments is that they are not liquid and therefore must be sold in advance to release cash, but they may be a good solution for holding value just up to the time for retirement.

Control Fixed Expenses

Retirees need to control their fixed expenses if they are to fight inflation. It might be necessary to sell a large house to opt for a smaller dwelling to get rid of mortgage payments for instance, or to cut out spending on other unnecessary items. You are only susceptible to inflation to the extent that your spending is tied to items that are steadily on the increase so watching your budget and finding cheaper alternatives can really help to minimize the impact.

Play it Safe… But Not Too Safe

It may be necessary to take some risk with your investments to increase your return, especially if you are closer to retirement and you have not reached your target for savings. This can help to boost your yield and give your retirement account a much needed injection of inflows. However, this must not be done at the expense of sound financial reasoning. Any risk you take using your retirement funds must be calculated otherwise you are gambling your financial security blanket just before you are going to need it.

Continue to Earn to Supplement Retirement Income

Another option is not to stop working. Many people are turning to a working retirement because they are not ready to let go of their income or because they need to have some activity to fill their days and they figure this activity may as well contribute to their wealth. SeeGreat Job Ideas if you are Not Ready to Retire for more information.

Retirees can sidestep the rising cost of living if they plan for it in advance and by making some smart financial decisions during their retirement years.