How to Inflation-Proof Your Nest Egg

Maximize your Social Security benefits

Social Security provides inflation protection through an annual cost-of-living adjustment (COLA) that tracks year-to-year changes in consumer prices. The higher your base benefit, the bigger the dollar increase you’ll see from a COLA.

The surest way to maximize your Social Security benefit is to wait to claim it. You can file for retirement benefits as young as age 62, but you’ll get as much as 30 percent less than if you wait until your full retirement age (which is 67 for anyone born in 1960 or later) — and 77 percent less than if you put off filing until age 70, when you can claim your biggest benefit.

Consider inflation-protected Treasury bonds

Treasury Inflation-Protected Securities, or TIPS, are sold by the U.S. Treasury in terms of five, 10 and 30 years. As their name suggests, they provide protection against rising costs because their face value (called principal) goes up with inflation, as measured by the Consumer Price Index. They pay a fixed rate of interest on the adjusted principal every six months until they mature..

However, TIPS shouldn’t be the only weapons in your inflation defense, says Andrew Crowell, vice chairman of wealth management at D.A. Davidson in Pasadena, California. “For most people, it’s an unrealistic strategy to say, ‘I’m going to work until 65 and put it all in TIPS.’ The interest from TIPS is not sufficient.”

Explore real estate investments

Owning rental property can provide a stream of income with inflation protection if you include a clause in your rental agreement that allows you to raise rents to account for rising prices, Crowell says. But you don’t have to be a landlord to take advantage of inflation-protected income from rental properties.

You could invest in real estate investment trusts (REITs), companies that own portfolios of income-producing real estate and pass on that income to shareholders through dividends. REIT values typically rise in lockstep with inflation. Your 401(k) might allow you to invest in REITs, or in mutual funds or exchange-traded funds (ETFs) that track a REIT index.

Don’t settle for low interest rates on cash accounts

When you’re in or near retirement, shifting some of your portfolio to safer assets, such as a money-market fund or a high-yield savings account, can reduce your risk exposure and provide ready cash for short-term needs, says Nathan Sebesta, a certified financial planner and owner of Access Wealth Strategies in Artesia, New Mexico.

The annual percentage yield on savings accounts currently averages 0.61 percent, but some high-yield accounts are paying as much as 4.31 percent, according to Bankrate. If you have money parked in an account at the lower end of that range, consider moving it somewhere else. You can compare high-yield savings accounts on marketplaces like DepositAccounts, Bankrate and NerdWallet.

Hedge against rising medical and long-term care costs

If you’re still working and have access to a health savings account (HSA), the funds in that account can help protect your nest egg against the rising cost of medical care, Crowell says.

An HSA lets you set aside pretax dollars for out-of-pocket medical expenses. Instead of using the funds now, you can let them grow, and withdraw the money tax-free in retirement to cover eligible health care costs.

You can also use HSA money to pay premiums for long-term care insurance, which may help cover the cost of an assisted living facility, nursing home or at-home caregiver. “The cost of care is exorbitant and getting even more expensive,” says Catherine Valega, a certified financial planner and founder of Green Bee Advisory in Burlington, Massachusetts. For example, assisted living community costs rose 10 percent from 2023 to 2024, according to the latest “Cost of Care Survey” by insurance company Genworth and CareScout, an online long-term care marketplace.

Long-term care insurance and hybrid life insurance policies that include a long-term care benefit often offer inflation protection riders that, for a premium surcharge, increase your policy’s benefit by a set amount (typically 3 percent to 5 percent a year) so it keeps pace with rising care costs. “If we get it in our 50s, by the time we need it in our 80s or 90s, that benefit has grown by 3 percent every year and is giving us that inflation hedge,” Valega says.

Review your plan periodically

Unlike other aspects of your finances that you can set on autopilot, it’s important to occasionally check on your retirement portfolio to see if your asset allocation is still aligned with the goal of outpacing inflation over the long run.

“Annual reviews and strategic rebalancing make sure you haven’t tilted too far away from stocks or accidentally doubled up on safe assets that fell behind,” Huey says.

Consider setting a calendar reminder to log in to your 401(k) or other retirement account at least once a year. You may need to sell some assets or adjust your contributions to keep your portfolio on track to outpace inflation.