Inflation can erode purchasing power in retirement, but the right strategies may help protect your savings. Learn about investment, income, and tax planning approaches.

Strategies to Preserve Your Retirement Savings from Inflation

By taking steps to adjust investments, income sources, and spending strategies, retirees can better manage the effects of inflation while maintaining their long-term financial goals.

Investment Strategies

Inflation can act as a drag on investment performance, potentially slowing returns and reducing long-term gains. However, certain investments may possibly help protect purchasing power.

1. Treasury Inflation-Protected Securities (TIPS) and I-Bonds

These government-backed bonds are specifically designed to adjust for inflation. TIPS increase in principal value as inflation rises, while I-Bonds adjust their interest rates to keep pace with inflation. Both options can serve as a low-risk way to help preserve purchasing power.

2. Real Estate Investments

Real estate can be a useful hedge against inflation, as property values and rental income often rise in step with the cost of living. Whether through direct property ownership or real estate investment trusts (REITs), investing in real estate provides an opportunity for long-term growth and income potential.

3. Dividend-Growth Stocks

Companies with a history of increasing dividend payouts can provide a steady source of income that helps offset inflation. Sectors like healthcare, utilities, and consumer goods tend to be more resilient during inflationary periods, making them attractive options for income-focused investors.

4. Commodities Exposure

Natural resources, agricultural products, and metals often see price increases during inflationary periods. Investing in commodities, either directly or through funds, can add diversification to a portfolio and potentially provide an additional layer of protection against rising costs.

5. Short-Duration Bonds

Short-term bonds are generally less sensitive to interest rate fluctuations compared to long-term bonds. This stability can be beneficial during periods of high inflation, as rising interest rates typically have a more significant negative impact on longer-term fixed-income investments.

Portfolio Structure Adjustments

Maintaining the right asset mix can help retirees balance investment growth with inflation protection. In some cases, adjusting portfolio allocations may be beneficial.

Lifestyle and Spending Adjustments

Strategic budgeting can help retirees adapt to Inflation while managing financial stability.

• Essential vs. Discretionary Expenses – Identifying core needs versus flexible spending categories can help allocate resources effectively.
• Relocation Considerations – Some retirees move to areas with lower property taxes, healthcare costs, and overall living expenses to stretch their savings further.
• Travel and Leisure Planning – Factoring in inflation-adjusted cost increases can help maintain a realistic budget for discretionary spending over time.

Income Planning Strategies

Your retirement income needs to grow over time to keep up with inflation. These strategies may help retirees maintain purchasing power.

Delaying Social Security

Waiting beyond full retirement age to claim Social Security benefits can lead to higher monthly payments. Since these benefits are adjusted annually for inflation through cost-of-living increases, delaying Social Security may provide a stronger foundation for long-term income security.

Pension Considerations

Some pensions offer cost-of-living adjustments (COLAs), but they may not fully compensate for inflation. Retirees relying on pensions should evaluate whether additional income sources, such as investments or annuities, are needed to maintain their desired lifestyle.

Annuities with Inflation Adjustments

Certain annuities provide payouts that increase over time to help offset inflation’s impact. These products can create a more predictable income stream in retirement, although they should be carefully evaluated based on individual financial goals and needs.

Required Minimum Distributions (RMDs)

When retirees reach the age where RMDs are required, keeping a portion of assets in inflation-resistant investments may help manage growth potential while still meeting long-term income needs via required withdrawals.

Tax-Efficient Approaches

Inflation can push retirees into higher tax brackets, even if their purchasing power remains the same. Tax planning strategies to help manage this impact include:

• Tax Bracket Management – Adjusting income sources, investment withdrawals, and deductions can help mitigate inflation-driven tax increases.
• Roth Conversions – Converting traditional IRA funds to a Roth IRA before RMDs begin may reduce future tax burdens, keeping more money available for inflation-adjusted expenses.
• Qualified Charitable Distributions (QCDs) – Donating up to $100,000 from an IRA tax-free can reduce taxable income while supporting charitable causes.
• Strategic Asset Location – Placing investments in tax-deferred, tax-free, or taxable accounts based on their tax efficiency may improve overall portfolio performance.

Action Steps and Implementation

Protecting retirement savings from inflation is an ongoing process. Regular adjustments can help retirees stay on track as economic conditions change.

Rising costs don’t have to disrupt your retirement plans. EP Wealth’s retirement planning advisors offer personalized guidance to help retirees navigate inflation, manage investments, and plan for long-term financial security.

Reach out today to an advisor near you.

DISCLOSURES:

• EP Wealth Advisors, LLC. is registered as an investment advisor with the SEC and only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the advisor has attained a particular level of skill or ability.
• Request an appointment with an EP Wealth Advisor when you have a minimum of $500,000 in investable assets – which includes qualified retirement plans (IRA, Roth IRA, 401(k), taxable brokerage, cash (savings / checking) and CDs. Investable assets do not include your home, vehicles, or collectibles.
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• The need for a financial advisor or financial planner and/or the type of services required are specific to the uniqueness of each individual’s circumstances. There is no guarantee or warrantee that the services offered by EP Wealth Advisors, LLC will satisfy your specific financial services requirements. Services offered by other advisors may align more to your specific needs.
• Information presented is general in nature and should not be viewed as a comprehensive analysis of the topics discussed. It is intended to serve as a tool containing general information that should assist you in the development of subsequent discussions. Content does not involve the rendering of personalized investment advice nor is it intended to supplement professional individualized advice.  
• EP Wealth Advisors (“EPWA”) makes no representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information presented. All expressions of option are subject to change without notice.
• All investment strategies have the potential for profit or loss. Different types of investments and investment strategies involve varying degrees of risk, and there can be no assurance that any specific investment strategy will be suitable or profitable for a client’s portfolio. The risk of loss can never be eliminated even if working with a professional.