Stocks will go up and stocks will go down. If you must just pick out one thing you can keep in mind, it will be that when you retire, prices of the things that you will generally need during this time will go up eventually. Having understood this, what you have to learn now is how to beat inflation during retirement or how you will be able to make your investments during your retirement grow big enough to offset the rising prices of basic commodities. It will require some kind of retirement planning on your end but don't fret because it is doable. Some of the things involved in learning how to beat inflation during retirement though may not be what you're expecting at all.
Dealing with inflation as a money-killer
When it comes to talking about ways wherein you can lose money, a lot of investors generally think about the prices of stocks dropping. The kind of impact that declines in stocks have on your net worth will be obvious and will be clearly delineated in your brokerage statements. Every quarter, when your brokerage statements are released, you'll know when the bear markets are striking your investments.
The inflation rate isn't as straightforward as you would hope although if there are big enough moves in the prices of food and oil, for instance, then you should be able to at least foresee when prices will be rising. Even so, the more gradual pace that inflation takes on is enough to lessen how much purchasing power you might have with your portfolio. It is important then to be very vigilant when watching your targets as these will let you learn how to beat inflation during retirement and essentially afford those things that you will be needing and wanting after you retire. This should also be the case when you go out and take an early retirement.
The obvious plays with inflation
Because inflation will always be a constant threat, financial products have evolved in order to fight off inflation and take advantage of as much deflation as possible. In particular, the US Treasury released TIPS or inflation protected securities, bonds that have their principal values indexed accordingly to inflation and changes along with the Consumer Price Index.
For investors who have their hands on TIPS, there may be several means to go about things. For starters, the service TreasuryDirect sells TIPS to the public directly, while a lot of discount brokers out there are allowed to buy TIPS from auctions at little to no cost at all. Additionally, ETFs and mutual funds teach you how to beat inflation during retirement by giving you a fully diversified portfolio containing TIPS and other similar instruments from various governments around the globe.
Another way for you to learn how to beat inflation during retirement is to go out and buy those immediate annuities where payouts are linked to fluctuations in inflation. Again, immediate annuities use the CPI as a typical reference point. But by making the move to ensure payouts generally rise alongside overall costs, you will be putting yourself in a way better position where your money will last long and you will also be able to preserve whatever purchasing power you have.
Going by way of a more traditional route, you can also learn how to beat inflation during retirement by buying some gold. Many people remember gold to be one of the most lucrative investments during the 70s, with double-digit inflation rates posing a massive threat to the American economy. Although gold eventually fell out as an investment option when inflation levels went down, the SPDR Gold Trust ETF was still very highly popular and easy to use. This and the big increments in the value of the metal more than 10 years ago have helped gold in recovering its reputation as a means of fighting off inflation.
Building a better link
For a lot of people though who have learned how to beat inflation during retirement, many prefer to fight off inflation by addressing a main point against measures that are CPI-linked: that a CPI is not an accurate measure of a person's experience when it comes to rising prices. Although the CPI is an offshoot measure, people will have individual tastes that will lead to different sorts of effective inflation rates. And even when you have specialized financial products, the CPI will still not accurately reflect the kind of price behavior that manifests in the things you buy.
The key then to really learning how to beat inflation during retirement is to simply make investments that have the tendency to grow when your basic necessities are rising in prices. Want to stave off higher energy costs? Then consider investing in energy giants. As electrical prices rise, energy giants will be benefiting from higher profits, which you will be able to benefit from as well since you are an investor in their company.