Senior Resources » 5 Smart Money Moves for Retirees to Stay Ahead of Inflation

5 Smart Money Moves for Retirees to Stay Ahead of Inflation

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In the US, prices have gone up 3.4% in just the past year, alone. This can make it tough to keep your savings safe, because, well, if you’re spending more, you sure aren’t saving more. It’s too true – Inflation can erode the value of your hard-earned savings. It’s more important than ever to employ some smart strategies that can help maintain your purchasing power.


Inflation Explained Simply: Inflation is a sneaky price hiker that slowly makes things more expensive over time. It might not seem like a big deal at first, but over years, it can add up.

Why should retirees care? Retirees, especially those on a fixed income like Social Security, often rely on their savings and benefits to cover their expenses. Here’s how inflation can affect YOU:

  • Shrinking Buying Power: Imagine your retirement income covers your needs today. But if inflation keeps pushing prices up, that same income might not buy as much tomorrow. Your money has less buying power and this makes it harder to afford everyday things like groceries, utilities, and even healthcare.
  • Impact on Savings: Let’s say you saved up a nice little nest egg for retirement. Inflation can slowly eat away at the value of those savings over time.

Inflation Rates Over the Past 5 Years

“The inflation rate is the percentage change in the price of products and services from one year to the next” (Investopedia). In other words, the inflation rate tells us how much more expensive things have gotten in a year. Here’s a simple look at the US inflation rate over the past 5 years:

YearAverage Rate of Inflation
Bureau of Labor Statistics Consumer Price Index 

5 Smart Money Moves for Retirees to Stay Ahead of Inflation

While traditional savings accounts are generally safe, they may not always offer the best protection against inflation. Let’s explore some different ways to ensure your money stays safe, even in these rough economic times. Here are 5 smart money moves for retirees to stay ahead of inflation!

1. Diversify Your Savings

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Think of diversification as NOT putting all your eggs in one basket. By spreading your savings across different types of investments, you’re not relying on just one to do well. This helps protect your money if something unexpected happens in the market, like, say, a company going out of business. Here are some ways to diversify your savings:

Mutual Funds

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Imagine a large pool of money that many people contribute to. A professional manager takes charge of this money and uses it to buy shares in a variety of companies across different industries. These companies could be technology, healthcare, energy, or even consumer goods. By investing in a mutual fund, you essentially own a small piece (a share) of this collection of investments. So, instead of picking individual companies to invest in, you’re getting a slice of ownership in many companies at once.


Here’s how mutual funds can potentially make you money:

Stock Appreciation

  • When a mutual fund invests in companies, it buys shares of their stock.
  • If these companies perform well and their stock prices increase, the value of your mutual fund shares also increases.
  • When you sell your shares at a higher price than you bought them, you earn a capital gain.


  • Some companies distribute a portion of their profits to shareholders in the form of dividends.
  • When a mutual fund holds shares in these companies, you, as a mutual fund shareholder, receive a portion of those dividends based on the number of shares you own in the fund.

Reinvesting Dividends

  • Many mutual funds allow you to automatically reinvest your dividends back into the fund.
  • This means your dividends are used to purchase additional shares in the fund, which can further increase your overall investment and potential for growth.

It’s important to remember that mutual funds don’t guarantee a profit. The overall performance of the companies the fund invests in will determine whether you make or lose money. However, by diversifying across different companies and industries, mutual funds can help to mitigate risk and potentially provide a better long-term return than keeping your money in a traditional savings account.

ETFs (Exchange-Traded Funds)

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Similar to mutual funds, ETFs also hold a basket of various investments. However, unlike mutual funds, ETFs trade throughout the day on the stock market, just like individual stocks. This means you can buy and sell shares of an ETF at any point during trading hours, offering more flexibility. ETFs can also be more specific in their focus.


ETFs make money in very similar ways to mutual funds, but with some added flexibility:

Share Price Appreciation

  • Just like mutual funds, ETFs hold shares in various companies or other assets. When these holdings perform well and their stock prices increase, the value of your ETF shares also increases. If you sell your shares at a higher price than you bought them, you earn a capital gain.

Dividend Distribution

  • Some companies within the ETF might distribute dividends to shareholders. As an ETF shareholder, you’d receive a portion of those dividends based on the number of shares you own in the ETF.

Reinvesting Dividends (Optional):

  • While not all platforms offer this option, some brokerage accounts allow you to automatically reinvest your dividends back into the ETF. This means your dividends are used to purchase additional shares in the ETF, which can further increase your overall investment and potential for growth.

The key difference between ETFs and mutual funds in terms of earning money lies in their trading style:

  • Mutual Funds: Mutual funds are typically bought and sold at the end of each trading day at a Net Asset Value (NAV) which reflects the value of all the underlying holdings.
  • ETFs: ETFs trade throughout the day on stock exchanges, just like individual stocks. This means their price can fluctuate throughout the day based on supply and demand, potentially offering more flexibility for buying or selling at a specific price point.

2. Non-Liquid Investments

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We all know it’s important to keep some money easily accessible in case of unexpected expenses. But if you’re looking for ways to potentially grow your savings even more, here are some non-liquid investments to consider. Remember, with these investments, it might be a little harder to get your money quickly if you need it right away. So, they’re best suited for long-term goals.

Certificates of Deposit (CDs)

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Think of a CD as a promise with a bank. You agree to leave your money there for a certain amount of time, and in return, the bank typically offers a higher interest rate than a regular savings account. The longer you commit to leaving your money alone, the higher the interest rate you might get. But there’s a catch: if you need your money before the CD matures (or, ends), you might have to pay a penalty.


future of an annuity
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An annuity is an agreement with a company where you give them a lump sum of money now, and in return, they promise to pay you a steady stream of income for the rest of your life, kind of like a monthly pension. This can be a good option for retirees who want guaranteed income to help cover their expenses.

Annuities can be complex and have fees, so it’s important to shop around and understand all the details before investing.


Here are some things to keep in mind with non-liquid investments:

  • They’re less flexible: You typically can’t access your money quickly without facing penalties.
  • They can be riskier: The value of some non-liquid investments can go down, so there’s a chance you could lose money.
  • They might have fees: There may be fees associated with buying and selling these investments.

3. Invest in Real Estate

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We’ve talked about how inflation can make things more expensive over time. But what if you could own something that goes up in value alongside inflation? Real estate, especially rental properties, can be a great way to fight inflation and potentially grow your savings for the long term. Here’s how:

Rising Rent

Imagine you buy a rental property. As inflation goes up, the cost of living typically goes up too. This means people pay more to rent a place to live. So, you could potentially increase the rent you charge over time, helping your income keep pace with inflation.

Equity Buildup

Over time, as you pay off your mortgage, you gain more ownership (equity) in the property. This is like slowly paying off a loan on a valuable item – the more you pay down, the more it becomes yours.

Property Value Appreciation

Just like some things get more expensive because of inflation, real estate often follows suit. Over time, the value of your property could increase. This means if you decide to sell your rental property down the road, you might make a profit on the sale, thanks to inflation driving up prices.

Here’s a quick rundown of the pros and cons of real estate investing:

  • Steady rental income
  • Property value appreciation
  • Real estate requires more active management than some other investments. You might need to deal with repairs, finding tenants, and managing any issues that arise with the property.
  • Buying real estate typically requires a significant upfront investment, including a down payment and closing costs.

4. High-Yield Savings Accounts

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High-yield savings accounts can be a smart and easy way to fight back for your savings! Here’s how they work:

  • Compared to traditional savings accounts, high-yield savings accounts typically offer significantly higher interest rates. Think of it like earning more points on your purchases with a rewards program – your money grows a little faster.
  • Your money stays readily available. That means if you have an unexpected car repair or medical bill, you can access your funds quickly, unlike some other investments.
  • Most high-yield savings accounts are FDIC-insured, which means the government protects your money up to a certain limit in case the bank fails.

Here are some things to keep in mind about high-yield savings accounts:

  • While high-yield savings accounts do offer better rates than traditional accounts, inflation can sometimes outpace those rates. This means the increase in the cost of living might still be higher than the interest you’re earning.
  • Some high-yield savings accounts may require you to maintain a certain minimum balance to qualify for the advertised interest rate.

5. Brokerage Accounts and Money Market Accounts

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We’ve explored some great options for keeping your savings safe, accessible, and most importantly, inflation-proof. Now, here’s a breakdown of two options for the slightly more adventurous saver:

Brokerage Accounts

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Imagine a toolbox filled with different tools – a hammer for nails, a saw for wood. A brokerage account is similar. It allows you to invest in a variety of things, like stocks, bonds, and mutual funds. This lets you build a personalized investment portfolio that aligns with your risk tolerance and goals.

  • Compared to savings accounts, brokerage accounts offer the potential for significantly higher returns. Stocks, for example, have the potential to grow in value over time, but also come with the risk of going down. It’s like planting a seed – there’s a chance it could blossom into a beautiful plant, but there’s also a possibility it might not grow at all.
  • The beauty of a brokerage account is diversification. Having a variety of tools helps you tackle different projects. This helps manage risk because if one investment goes down, another might go up, potentially balancing things out.

Money Market Accounts

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Think of a money market account as a hybrid between a traditional savings account and a certificate of deposit (CD). It offers some of the benefits of both:

  • Money market accounts typically offer higher interest rates than regular savings accounts.
  • Unlike CDs, which lock up your money for a specific term, money market accounts usually allow you to access your cash relatively easily. This gives you more flexibility than a CD, but with potentially less risk.

Smart Money Moves

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The bottom line is that inflation-proofing your savings involves a mix of strategies, each with its own set of benefits and risks. The goal is to strike a balance between accessibility and growth potential. Always consult with a financial advisor before deciding which of these strategies fits your specific needs and financial goals.

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Originally published May 29, 2024


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