We can’t stop inflation, but there are a number of things we can do to plan or prepare for it. Inflation is often regarded as the silent killer for retirement plans. Rising inflation means rising prices which results in reduced spending power for retirees.
One measure to take is to ensure a portion of your portfolio is allocated towards investments that won't be hurt by higher inflation rates and preferably outpace inflation. Some of these investments may include stocks, mutual funds, commodities and real estate.
Another precaution to take involves retirees cash savings. It is prudent to keep necessary savings in cash for emergencies or in case of a recession. But there is a drawback to either having too much cash or holding cash in accounts that pay meager interest rates. Your cash is losing purchasing power to inflation. This means the more cash you have the more purchasing power you lose. There are number of good places to store your cash to prevent this as much as possible. See my article titled, WOULD YOU LIKE TO EARN MORE THAN 0% ON YOUR SAVINGS for more details.
The following video provides a good overview on inflation and some measures to take:
If you would like to learn more about protecting your retirement savings from inflation or determine how much cash reserves is prudent, please contact us.