If you’re like many people, the older you get, the more you think about effectively planning your retirement. There is no way to be 100% certain how long a person will live after they retire or exactly how much money they will need, you must be aware of some basic principles.

One of these, the certainty of inflation, is often overlooked by pre-retirees. It’s only several years into retirement that seniors sense their money simply isn’t going as far as they once did and that they may have underestimated how much they needed to create their dream retirement.

Many retirement planners preach a strict gospel of “avoid risk at all costs.” But, is this truly the advice for those within 5-10 years of retirement?

What about the impact inflation has, not only on your daily purchases and costs of goods and services but on your retirement savings? Actuarial tables indicate that someone retiring right now at age 65 might live another 20 years or more. Using a modest 3% rate of inflation, your cost of living could double in under 25 years!

If your financial advisor seems too intent on protecting your wealth and has no strategy in mind for achieving growth that offsets or outpaces inflation, you may need to get a second opinion.

Here are a few issues you should discuss with your advisor as you enter your financial life’s distribution phase.

Cost-of-living (COLA) adjustments for Social Security won’t keep pace with inflation. A major source of retirement funding for seniors is Social Security.

While Social Security, unlike other investments, does provide periodic cost of living increases, these have never managed to offset inflation. Many financial experts believe that the Social Security Administration uses benchmarks that underestimate the actual rate of inflation. For example, from 2000-18, the cost of drugs commonly prescribed for seniors rose 188%. This dramatic spike caused the purchasing power of Social Security to fall by 34%. The lesson here is that, while Social Security is an essential piece of your retirement plan, you cannot expect payouts to keep up with inflation.

Investments and savings erode with inflation. Like water, inflation has a slow but dramatic ability to erode nearly everything it touches.

While the immediate consequences of inflation seem minor, over time, the effects compound, impacting every aspect of your post-work life. To loosen inflation’s grip on your finances, consider investing in things other than bonds and CDs, whose rates of return can be much, much lower than a conservative 2% inflation rate. Ask your financial advisor for guidance.

Profit-sharing and 401(k) plans may not keep up. Typically, 401k plans and profit-sharing initiatives do not adjust as rapidly to the threat of inflation as do traditional pensions. This is especially true if inflation increases during the final few years of employment. If you are healthy and still working, consider delaying retirement to mitigate a potential decline in purchasing power due to inflation. If you are fortunate enough to receive a pension, delaying retirement could help protect you since your benefits are often linked to your average highest three years of salary. By waiting as long as possible to retire, you might see a bump in benefits when inflation rises, and your salary receives a cost of living adjustment.

Inflation risk is real, and seniors must account for it when designing their retirement blueprints. Retirees and those about to retire must actively manage their finances and understand the ramifications of inflation.

STEVE DYBWAD is a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money management. Syndicated Columnists is the sole provider of material, both finished and conceptual, for this column.

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