Inflation refers to the general rising of prices of goods and services. As inflation continues, the purchasing power of the dollar decreases. Fortunately for many people in the workforce, salaries tend to increase consistent with inflation. However, for those who are no longer working and relying on their savings to provide fixed income, inflation can take a big bite out of their money. Your money will not be able to buy you as much in ten years as it can today, and that’s an important factor that many people forget to consider when planning for retirement. Here are 3 ways that you may be able to protect yourself from the impact of inflation in retirement.
- Stay Invested in Stocks: Many people switch to a more conservative stock portfolio when it comes time to retire. This is a safe option, however, if you want to protect your money from inflation, it may be a better choice to invest in (or stay invested in) stocks for a portion of your assets, if your personal risk tolerance allows it. Stocks can lose money and are not guaranteed to outpace inflation, but some have the potential to perform well over long periods of time. You should aim o diversify your portfolio with the right mix of stocks and more conservative investments like bonds to fit your situation.
- Own Real Estate: One way to create a hedge against inflation is to own assets that are expected to increase in value over time. Real estate is one of those assets. Some professionals recommend that retirees at least pay off their own homes and also consider investing in rental property to generate income and to have an appreciating asset.
- Purchase an Annuity: Annuities are insurance contracts that are used to protect savings from market volatility and create a consistent stream of income in retirement. Not all annuities are good for fighting against inflation, but some offer added inflation riders that you can purchase. With these contracts, your payments have potential to be indexed to help address inflation.
Are you concerned with the purchasing power of your money going down as inflation increases? Contact Absolute Retirement Solutions and speak with an experienced financial professional today. We help our clients develop personalized strategies for getting the most out of their retirement savings. We also provide a variety of annuities; if you are considering this strategy, we can help you identify which type of annuity contract is right for you.