Your Retirement Plan Needs to Beat Inflation - Here's How to Do It

Many people have noticed the impact of inflation, as the prices of groceries, utilities, housing, and medical care have been slowly rising. This could be especially concerning for retirees who carefully created a retirement plan and are living on a fixed income, unlike workers who may be able to rely on raises at work to make expenses more affordable.

Fortunately, there are a few steps retirees are able to take to insulate their retirement accounts against the effects of inflation. Here are some examples.

A market crash may not be the biggest threat in retirement

Many people assume that a market crash during retirement is one of the biggest threats to their livelihood. After all, a market crash could be scary for retirees, as many people may see their retirement accounts drop substantially.

However, there is a quieter threat to people's financial well-being and retirement: inflation. Inflation could be sneaky because prices slowly rise over time, unlike a market crash, which is likely to make headlines. With inflation, you may notice that your groceries are more expensive or your energy costs go up. Even though you are investing your money and it may be growing in your retirement accounts, it could still be hard to keep up with rising expenses.

Inflation could hit retirees harder

The inflation categories that rise the fastest are health care and housing. These two categories could affect retirees in particular because they make up a larger share of their budgets. Fidelity research showed that retirees spend, on average, $172,500 on health care from the time they are 65. These costs may include health care premiums, deductibles, copays, and medications, but don't include nursing home costs or long-term care facilities.

When health care and housing costs rise, retirees may not be able to afford extras, like vacations or dining out, which could inhibit their retirement lifestyles.

Social Security's COLA may not make up for rising prices

Even though Social Security has an annual cost-of-living adjustment, it's often not enough to keep up with rising inflation. For example, in 2026, the cost-of-living adjustment was 2.8%. Yet, according to data, overall consumer prices rose 3.5% from June 2025 to June 2026. Some years, inflation grows faster than in others, but even a 1% difference between cost-of-living increases and inflation could mean retirees have a harder time keeping up with their bills. It may not be noticeable at first, but over 20 to 30 years, the gap between income and costs could widen.

Strengthen guaranteed, inflation-protected income

One of the first action steps retirees could take to combat inflation is to strengthen their guaranteed, inflation-protected income. For example, delaying Social Security to age 70 means that their benefit increases by 8% every year. If retirees are able to delay collecting Social Security, a larger check could help them afford more everyday expenses. Keep in mind that even if retirees are getting the largest possible Social Security check, they are still entitled to future cost-of-living adjustments.

Take a flexible approach to retirement withdrawals

The next action step retirees may want to take is to be flexible with their retirement withdrawals. Depending on inflation and market returns, retirees may want to withdraw more or less from their retirement accounts than in the previous year. This could help to preserve retirement savings for longer, as it could limit the amount of money retirees withdraw during a down market.

Be mindful of staying too conservative or too aggressive

When inflation impacts retirement savings, some retirees may be tempted to move all their money into cash and bonds. However, being too conservative could also have a detrimental effect on savings, as cash values decline. Similarly, being overly aggressive and investing in riskier assets could be detrimental to retirement savings during periods of market turbulence. Ideally, retirees could work with a financial planner who could help them create a balanced portfolio that matches their retirement lifestyle goals as well as their risk tolerance. A financial planner could also help retirees create a withdrawal plan if needed, as well as provide guidance on ways to optimize taxes.

Keeping an emergency fund could help hedge inflation

Keeping cash in a high-yield savings account could help to hedge against inflation while also keeping money liquid for retirees who don't want to withdraw from their retirement accounts during a market dip. Some financial experts recommend keeping 18-24 months of cash in a high-yield savings account while in retirement to handle unexpected expenses.

Bottom line

Being in retirement means taking an active approach to managing your investments and your retirement goals. That means monitoring them, making a withdrawal strategy each year, and building an emergency savings account. Additionally, retirees may have to cull their spending and pay closer attention to their expenses during periods of rapid inflation to help preserve their nest eggs.