While many people get excited about the idea of retiring, that transition can also be nerve-wracking. In addition to dealing with a big change in routine, you may be grappling with financial worries -- even if you've managed to accumulate a pretty large nest egg.
One reason so many retirees fear running out of money is the perpetual threat of inflation. Even modest price increases can erode your buying power over time.
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The good news is that with the right strategy, you can set your savings up to beat inflation. Here are a couple of tips to employ in your retirement plans.
1. Invest in income-producing assets
The higher the returns your portfolio is able to generate, the more inflation protection you get. To that end, don't shy away from stocks in retirement, even though you may be feeling pretty risk-averse at that stage of life. You need stocks to produce strong returns that allow your money to grow even while you're taking withdrawals.
In particular, you may want to load up on dividend stocks or exchange-traded funds. Not only do these assets have the potential to gain value over time, but the income they produce gives your portfolio a natural boost. Plus, companies with a strong history of paying dividends tend to be less volatile than those focused on chasing growth.
2. Delay your Social Security claim
Once you turn 62, you're allowed to sign up for Social Security. And you can get your complete monthly benefits at full retirement age, which is 67 for anyone born in 1960 or later.
There's also the option to delay your Social Security claim past full retirement age, though. And for each year you do, until you turn 70, your monthly benefits get an 8% boost.
Having access to larger Social Security checks puts less pressure on your portfolio. So even if inflation picks up during retirement, if you're able to stick to a smaller withdrawal rate because you have more Social Security income coming in, that could be the ticket to making sure your money lasts as long as you need it to.
Remember, too, that Social Security benefits get an annual cost-of-living adjustment. The larger your monthly benefits are to begin with, the more money those yearly raises are apt to put in your pocket.
The idea of running out of retirement savings is unquestionably scary. But with the right investments and Social Security strategy, you can minimize the chances of that happening to a pretty large degree.
