How to Protect Your Retirement Savings as Inflation Soars

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Freda Robinson, 65, lives a frugal life. She uses coupons, compares weekly grocery store ads and hunts for the best deals.

But rising inflation worries Robinson, a South Carolina resident who retired from her job in May 2018.

She’s concerned that her nest egg won’t last as prices on everyday items continue to rise.

“I would dare say anyone who isn’t Jeff Bezos is concerned about outliving their savings after they retire,” Robinson told The Penny Hoarder.

Inflation is higher than it’s been since the 1980s. And those higher prices are alarming for retirees, said Summer Red, an accredited financial counselor at the nonprofit Association for Financial Counseling & Planning Education.

“Retirees often have limited resources — their incomes may be fixed and their only other assets are their savings and their house,” Red said.

Social Security and savings are the two biggest sources of income for most retirees. While Social Security does increase annually for inflation, savings do not.

Why Inflation Affects Retirees More Than Everyone Else

Retirement savings can mean a few things. It can mean cash in a savings account or investments held in a retirement account, like a 401(k) or IRA.

Retirees with money in a diversified portfolio or retirement account are generally better equipped to weather high inflation. That’s because stocks have historically — over long periods of time — outpaced inflation. In fact, the average stock market return is about 10% per year for nearly the last century.

So investments like in mutual funds, ETFs or others with a decent stock allocation are less likely to lose value as inflation increases.

But retirement planning generally involves moving assets out of stocks and into safer vehicles as retirement draws closer. So there are millions of retirees sitting on mostly cash (like a savings account) or fixed-rate investments (like bonds and CDs).

“If the interest rate on a savings account is less than…

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