How To Protect Your Social Security and Retirement Income From Inflation
Written by
Josephine Nesbit
Edited by
Zuri Anderson
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One of the biggest concerns for those nearing or in retirement is protecting retirement income from inflation.
“For many retirees, the protection of purchasing power (and therefore lifestyle) is more of a risk than running out of money,” Anthony C. Kure, certified financial planner (CFP), senior portfolio manager and principal of Johnson Investment Counsel, wrote in an email.
While Social Security provides built-in cost-of-living adjustments (COLA), most retirement income sources do not automatically rise with inflation. Over a retirement that can last 20 to 30 years or more, even modest inflation can reduce the value of fixed-income streams and savings.
Here are strategies retirees and those approaching retirement can use to help protect their income from inflation.
Claim Social Security
“Social Security income should be adjusted for inflation. Even if the adjustments don’t truly keep up with inflation, the COLA increases mean you won’t have to absorb the impact of inflation entirely yourself,” Melanie Musson, finance expert at Quote.com, wrote in an email.
For example, the COLA for 2026 is 2.8%, which reflects changes in prices for a set of consumer goods and services, the Social Security Administration reported. This means that the average monthly retirement payment has increased by an estimated $56, from $2,015 to $2,071.
“We believe the decision on Social Security claiming is critical as Social Security is the only government-guaranteed, inflation-adjusted income stream available to Americans,” Kure added. “We believe Social Security forms the foundation for our strategy in designing a retirement income stream that keeps pace, or exceeds, inflation over time.”
Allocate a Portion of Your Portfolio to High-Quality Equities
In addition to Social Security, Kure explained that the investment portfolio is the next source of retirement spending dollars that maintains purchasing power.
“We believe allocating an appropriate percentage to high-quality equities has the best chance of providing real purchasing power increases over a long enough time period,” he added.
Balance Equity Growth With High-Quality Fixed Income
However, Kure also warned that equities can be volatile.
“That said, equities can be very volatile in the near term, so we need to pair the equity allocation with an appropriate mix of high-quality fixed income (bonds), which, in addition to Social Security, should provide at least several years of annual spending needs for the retiree,” Kure wrote.
Maintain Multiple Years of Retirement Spending in Reliable Lower-Risk Assets
Maintaining several years of retirement spending in lower-risk assets can help protect income during periods of market volatility.
“While opinions can differ on the number of years’ spending that should be allocated, we believe at least five years of net spending (spending in excess of Social Security) is the minimum amount, which has historically allowed enough time for most bear markets in equities to recover,” Kure explained.
While some retirees consider gold or other commodities as a hedge against inflation, Kure warns that these assets are generally not well-suited for funding near-term spending needs.
“We believe gold (and other precious metals) can be considered in a broader asset allocation, but to rely on gold to be a pure hedge to inflation is a mistake,” he added. To qualify as a pure hedge, Kure explained that a commodity should consistently and reliably hedge against inflation.
“Gold does not have a great track record for always providing this protection,” he wrote. “There have been decades where it has worked, and there are others where it has not.”
Kure recommends U.S. equities and a fixed-income portfolio for maintaining purchasing power over time.
Reduce the Impact of Inflation Through Planning and Spending Decisions
Inflation can impact retirement income, particularly for retirees who rely on savings and fixed-income sources.
“Money that you have saved in retirement accounts will be 100% impacted by inflation. What you save is what you save. It doesn’t get a boost when inflation skyrockets,” Musson wrote. “So, the best way to protect your income from inflation is to plan for it. If you plan adequately, you’ll have enough saved to support your lifestyle despite inflation.”
According to Musson, if you’re nearing retirement and don’t have time to adjust your retirement plan, you can delay your retirement to help you save more and have fewer years to live on your savings.
“You can also pay off as much as you can, like your house, your car and any other debts. By paying off debt, you lower the amount you need to sustain your lifestyle,” Musson added.
She also recommends seeking out assistance if you can’t keep up with your bills, such as energy assistance, food assistance or other programs.
“If you can save money on necessities, the income you have will go further,” Musson wrote.
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