Kiplinger’s Personal Finance: Build an inflation hedge around retirement | Business News

For retirees, inflation brings two headaches: stretching a fixed income to meet rapidly rising prices and investing a retirement savings portfolio so that it keeps pace with the higher cost of living.

“The biggest fear for retirees is running out of money,” says Chris Miller, founder of the RIA South Pointe Advisors in New York City. “High inflation reduces their purchasing power and increases the likelihood that their portfolio cannot support their spending needs.”

The Federal Reserve expects inflation will subside and range somewhere between 2.5% and 3% by the end of 2022. That’s still higher than the 1% to 2% annual rate from the past decade, and the Fed could also be wrong.

Inflation also has its silver linings. The Social Security Administration increased its payments for 2022 by 5.9%, the biggest hike in four decades. “While this won’t fund all the projected price increases, it will help,” says Phil Michalowski, head of annuities with MassMutual. “Most importantly, when Social Security benefits are indexed up, it is a one-way adjustment. The benefits do not ever index down.”