Financial Focus: Inflation-Fighting Strategies for Retirees is provided by Edward Jones for use by contributor Aubrey Wilson. This article is published in the Spring/Summer 2025 Edition of Vibrant Senior Options Resource Guide Magazine.
At different times, inflation may be high or low, but except in rare periods of deflation, it’s always with us. During your working years, when you may receive salary boosts, you have the potential to keep up with inflation. However, what happens when you retire? As a retiree, how can you cope with the rising cost of living? Here are a few inflation-fighting strategies:
Consider Inflation-Adjusted Bonds
During your retirement years, you may want to move a portion of your portfolio toward a more conservative approach by owning investments that offer significant protection of principal. However, these investments offer little in the way of growth, which means they are susceptible to inflation. To help mitigate the impact of inflation, you will want to keep some of your portfolio in growth-oriented investments such as stocks and stock-based securities.
Consider Inflation-Adjusted Bonds
You might want to consider Treasury Inflation-Protected Securities (TIPS) as one of your inflation-fighting strategies. These are indexed to the Consumer Price Index, so the principal increases with inflation and decreases with deflation. Another inflation-adjusted Treasury security to consider is the I bond, which differs from TIPS in that the principal doesn’t change but the interest rate does, every six months, based on a combination of a fixed interest rate and the inflation rate. Like all investments, TIPS and I bonds have various features and risks which you should be aware of before investing.
Don’t Hold Too Much Cash
During your working years it’s a good idea to have an emergency fund containing several months of living expenses in liquid, low-risk accounts. When you’re retired, a good strategy is to have up to one year’s worth of expenses in such a fund. Be mindful about holding too much in cash, as it will lose purchasing power each year due to inflation.
Think About Extending Your Employment
If you like what you do, you might want to consider working a few years longer than you had originally intended. Not only will you be bringing in more income, but you could also continue to contribute to retirement accounts, including your IRA and 401(k). Even if you don’t want to continue working full-time, you could do some part-time work or consulting.
Inflating-Fighting Strategies for Defense
You can’t control the cost of living, but by implementing some of the strategies described above, you can help yourself mount a defense against the effects of inflation during your retirement years.
This content is provided by Edward Jones for use by Aubrey Wilson, your Edward Jones Financial Advisor at 360-588-4548.
