5 ways to protect your retirement against inflation
Inflation — as high as 17.5% on gas12.4% on groceries and 7.5% on rent – hurts everyone’s finances, especially retirees and near-retirees.
Here is five steps from Kiplinger magazine to combat the damage inflation has done to your retirement savings so you can enjoy a comfortable retirement.
1.) Conduct a thorough budget analysis
Review everything you’ve spent in the past six months, as well as your earnings and any other income.
Break down fixed and variable expenses. Fixed costs are things like mortgage, utilities, phone, cable, and insurance. Variable expenses are for things like travel, dining out, groceries, entertainment, and the like.
This exercise could open your eyes to disproportionate spending and help you set goals.
Then, when you compare your expenses to your income, you can see if you have a surplus or a deficit. If your budget is in the red, this should tell you that you need to make adjustments.
If you’re in the dark, you might want to put that money to good use by paying off debt, creating an emergency savings fund, setting aside a savings account for a rainy day, or adding more to your retirement savings.
2.) Have a cash cushion so your investments can keep growing
It’s tempting – especially for older, retired or risk-averse investors – to pull money out of investments when markets are volatile, but now is not a good time to buy back stocks, according to planners. ‘investment. (Even for retirees, whom planners are increasingly advising to stay at least somewhat invested in the stock market due to increasing longevity.)
A better strategy, say financial planners, is to have cash on hand for daily bills, so you stay invested and can ride the bumpy roads.
This should be paired, of course, with a fully diversified portfolio, they add.
3.) Delaying Applying for Social Security Benefits to Get a Bigger Check
While the Social Security Administration allows workers or recipients to apply for benefits between the ages of 62 and 70, almost all financial planners agree that it is always best to delay these payments until the earliest possible age in order to get a bigger check.
Of course, if you decide to start receiving Social Security payments until age 67 or 70, you’ll either have to stay in the workforce until then or put enough money aside to meet this gap.
4.) Downsize and relocate
If ever the term “living within your means” has resonated among people, perhaps it resonates most with the older crowd.
If your kids have flown out and you have an empty nest, or if you’re retired and no longer need to commute to work in a city or metropolis, consider moving into housing. smaller ones in a more affordable part of the country.
In fact, given how damaging inflation has been to people’s budgets over the past year, Kiplinger suggests that downsizing might even be considered for those in mid-to-late careers.
5.) Consider inflation-protected annuities
Inflation-protected white annuities will give you a lower payout than traditional annuities, they can be a lifesaver for retirees on fixed incomes.
Inflation-protected annuities that will give you guaranteed fixed payments for a fixed period or for life, and their payments are usually indexed to increases in the cost of living.
“We don’t know when inflation will be brought under control, but it’s still an important consideration in retirement planning and something to adjust when you’re retired,” Kiplinger concludes. “Be proactive as much as possible, as there are many actions you can take to mitigate the effects [of inflation] and don’t let it upset your retirement plans.
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