When you're planning for retirement, it's important to make sure you know what your expenses might look like and that you're saving enough to cover your anticipated costs. But it's equally important to plan for inflation. Over time, the cost of living is apt to rise.
That's just a natural part of the economy. But when you're no longer working and earning wages, it's crucial to have a strategy to beat inflation so you don't fall behind financially. Here are two ways you can combat inflation in retirement.
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Continue » Your portfolio should be set up to beat inflation in retirement, or at least keep pace with it. To that end, it's important to stay invested in stocks during your senior years. This doesn't mean 80% of your portfolio should be in the stock market.
You don't want to expose yourself to too much risk at a time when you're probably tapping your savings for income on a regular basis. But you may want to keep around 50% of your portfolio in stocks, depending on your risk tolerance and other income streams. Bonds are a great way to set yourself up with predictable income.
But a portfolio that's 90% bonds may not keep up with inflation the way you need it to. Part of what makes Social Security such a valuable income source is that it's guaranteed to pay you a monthly benefit for as long as you live. So, the more generous your monthly checks are, the easier it might be to keep up with rising costs.
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