Coping With the Retirement Killer: Inflation

If you have a dollar now, that dollar isn’t going to be worth nearly the same in 20 or 30 years, because of a loss of purchasing power. With the cost of almost everything going up every single year, that dollar is constantly eroding in value, even if you keep it safe under a mattress.

As an individual, there’s nothing you can do about broad national inflation numbers. But there is something you can do about your own portfolio, Current reports: Try to ensure it outpaces inflation, so you aren’t falling further behind.

“Inflation is the silent pickpocket of our financial lives,” says Patrick Huey, principal advisor with Victory Independent Planning. “If your savings are sitting in a zero-interest account while the price of everyday goods and services is climbing, you’re quietly losing ground with every passing month.”

Consider: The average interest rate for savings accounts is now .62% annually, according to financial information site Bankrate, with some large institutions offering a paltry .01%.

Meanwhile, the latest Consumer Price Index stands at 2.9%, according to the Bureau of Labor Statistics. That’s not as crushing as the 8% average reached in 2022 during the pandemic — but it’s still enough to significantly eat away at the value of your savings over time.

Drill down into the inflation numbers further, and you see which costs are spiking the most. For August, for instance, shelter was up .4% in a single month, according to the Bureau of Labor Statistics. Food and apparel: Both rose .5%. Energy, up .7%. Used cars and trucks: 1%.

Some parts of the country are feeling the effects of inflation more than others. The federal government’s Bureau of Economic Analysis measures where prices have risen to the highest in the country, compared to national averages. The ‘winners’: California, New Jersey, and Hawai‘i.

On top of all that, the American dollar has been sliding in 2025, pushing up prices on imports. The first half of the year saw the dollar’s biggest decline in more than 50 years.

Combine that currency slump with new tariffs from this administration on products from around the world, and it is increasingly challenging for consumers to keep pace with rising prices.

“This is a very important and timely topic that comes up quite often with clients,” says Mike Casey, founder and president of American Executive Advisors. “Everyone is feeling the pressure of rising costs.”

Fighting back: Four strategies

So given that higher-than-usual inflation is proving sticky, and unlikely to vanish anytime soon, how can consumers respond?

One classic response to inflation: Ownership of so-called ‘hard’ assets, such as real estate or commodities (like gold). Since the supply of tangible assets is by nature limited — unlike the money supply, since the Federal Reserve can essentially print as much money as it wants — the value of those assets should hold up well in inflationary times.

Another way to fight back is Treasury Inflation-Protected Securities, or TIPS. These are bonds sold by the government for terms of five, 10 or 30 years; the value of the principal goes up when the CPI goes up, giving investors some protection against rising prices.

A third way to cope with inflation is to adjust your retirement calculations to account for it, according to research firm Morningstar. That means potentially delaying your retirement by a couple of years, trimming spending, and adjusting withdrawal rates every year depending on inflation levels.

A final approach to inflation: To make sure the cash portion of your portfolio is working much harder for you. If it is earning next to nothing, for example, you are definitely losing ground.

However, currently many higher-yield accounts, especially at online or mobile-only banks, are offering 4% or even more on your savings. Compare that to the inflation rate of 2.9%, and not only are you not falling behind, you are managing to build up your cash reserve.

“I’ve been a fan of high-yield savings accounts for a long time,” says Daniela Jones, a financial planner with Intrinsic Wealth Counsel in Tempe, Ariz. “They are easy to set up, easy to link to your existing bank accounts, and easy to transfer money to and from.

“Why not let your emergency funds earn you a few extra hundred dollars a year? It takes maybe 10 minutes to set up — that’s a great return on your time investment.”

This story was produced by Current and reviewed and distributed by Stacker.