Key Points
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More than half of 401(k) participants indicate that inflation is the primary reason it’s difficult to save for a comfortable retirement.
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It’s important to understand inflation and develop a plan to overcome it.
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The first step is understanding how inflation erodes your buying power, and how to work around it.
Between April 2025 and April 2026, consumer inflation rose by 3.81%. That can be a scary statistic, especially if you’re nearing retirement or already retired. Everything, from paying for groceries to protecting your retirement savings, becomes a challenge as higher prices eat away at your income.
While there’s not a lot the average American can do to prevent inflation, there are moves that can safeguard the money you have. Here are five of those moves.
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Diversify with inflation-protected securities
Treasury Inflation-Protected Securities (TIPS) are government bonds designed to guard against inflation. The principal adjusts with the Consumer Price Index, meaning your investment keeps pace with rising prices. If the principal is equal to or lower than the original amount when the TIPS matures after five, 10, or 30 years, you get the original amount back in full. However, if the principal exceeds the original amount after that time, you get the larger amount.
TIPS accomplish two things: They provide inflation protection, and they offer the peace of mind that comes with knowing your money is backed by the U.S. government.
Review Medicare coverage
It’s impossible to deny the high cost of healthcare in retirement. Annually reviewing your Medicare coverage during open enrollment can ensure you have the most cost-effective plan to meet your needs. Plans change year by year, and what was best for you last year might need to be replaced by something better.
Take advantage of I Bonds
Series I Savings Bonds neatly combine a fixed interest rate with an inflation rate that is adjusted twice a year. You can buy up to $10,000 in Series I bonds for yourself each year, an additional $5,000 if you use your federal tax refund, and gift I bonds to your children without that amount counting toward your personal limit.
Take a fresh look at your emergency fund
The goal of an emergency fund is to help you avoid the use of high-interest credit cards. If your car needs new tires or your water heater goes on the fritz, you want to be able to pull money from an emergency account, rather than pulling out your credit card.
When it comes to that fund, how much you keep in the account and where you deposit the money matters. If the money you have invested in the market continues to grow, keep an eye on it, but let compound interest do its thing. High returns should offset the harsh effect of inflation.
As for easily accessible cash, aim for three to six months in an emergency account. More importantly, make sure that money keeps pace with inflation by depositing it in a high-interest checking or savings account.
Avoid panic
While it’s important to remain aware of economic conditions, avoid making impulsive decisions based on short-term market shifts. Your job is to maintain a long-term perspective by ensuring that your portfolio is well-balanced, you have an emergency fund in place, and you’re diversified enough to ride out an inflationary period.
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