Best Ways to Protect Yourself from Inflation

Inflation continued to inch up in February, with the Consumer Price Index for All Urban Consumers (CPI-U) up 0.2% in the month, and up 2.8% for all items over the past 12 months, still not reaching the Federal Reserve goal of 2.0%.

Though inflation is not as concerning as in 2022, when the inflation rate reached 8.0%, what can people aged 50 and older and retirees do to protect themselves against inflation?

Individuals and couples have a "personal rate of inflation" that depends on their particular finances. For example, if a retired couple has paid off their mortgage, their housing cost might be fairly stable except for property taxes, insurance and, possibly, monthly fees levied by a homeowners association, coop board or condominium manager. If, in contrast, they are renting, their housing cost is subject to annual increases.

What are other ways to counter inflation?

"The one thing we emphasize, especially as you are approaching retirement, it's definitely time to fine tune your spending plan," said Roger Young, a thought leadership director at T. Rowe Price.

Though housing is typically the largest expense in retirement, changing your housing situation "is not something you can do quickly," he said. Rather than aiming to change your non-discretionary expenses, financial experts advise focusing on things you can control: your discretionary expenses — your wants rather than your needs.

"It's good practice for everyone to revisit their auto-pilot types of expenses," Young said, such as cell phone plans, streaming services, subscriptions to news and tech services, health club and other memberships, vehicle insurance and homeowner's insurance. "Look at your recurring expenses and see if they are no longer important to you."

In addition, check to see how much you are spending for different types of insurance, how much the annual amount has increased and why it rose. Go over each policy line by line to see exactly what you are paying for and if you need that particular coverage. Will a lower-cost policy cover you adequately?

According to Bankrate's 2025 Annual Emergency Savings Report, 33% of U.S. adults have more credit card debt than emergency savings. While that is down from 36% in 2024 and 2023, it is much higher than in 2022, when only 22% of Americans had more credit card debt than emergency savings. "Savings were being depleted at the end of the pandemic," said Martin Lynch, president of the Financial Counseling Association of America. "People were back using credit cards."

If you are using credit cards to pay for recurring costs as well as for most of your monthly expenses, you have a record of exactly what you have been spending. "Monitor your credit card accounts," said Mark Hamrick, senior economic analyst at Bankrate.com. Look at one, two or three months of credit card statements or checking account activity to know where your money is going.

Faron Daugs, a certified financial planner with Harrison Wallace Financial Group in Libertyville, Illinois, said, "as long as you pay (credit cards) off in full, it's a really good way to capture what your spending habits are."

Spending is just one side of the ledger. "The other side of it is income," Young said. "Potential inflation is why we guide investors to allocate a significant portion of portfolios to stocks. Stocks have more potential than bonds to grow faster than inflation."

That said, for those with portfolios that may include brokerage accounts, 401(k) plans, traditional IRA, Roth IRAs, possibly annuities, investment property income, pensions and possibly, annuities, how you allocate the funds in your various accounts will depend on your cash flow needs.

For example, if you receive payments from one or more pension and Social Security retirement benefits, you may be able to tolerate more risk in your investment portfolios. On the other hand, if you are spending down from your investments on a regular basis to maintain your lifestyle in retirement, you may prefer a more conservative investment strategy.

Whatever your financial situation, a budget based on your guaranteed income and your non-discretionary expenses as well as those you choose is advisable.

"You have to have a good, accurate budget in place," said Lynch. Once you know how much money is coming in each month and how much you have been spending, you can determine your plan of action.

Will you simply cut whatever expenses you can or will you increase your income with a part-time job or some type of consulting? Or will you aim to do both?

Another approach is to stretch the income you do have with loyalty programs and cash-back or rewards credit cards, depending on your situation.

Do you want the cash back on purchases or do you prefer hotel or airline points? A lot will depend on your lifestyle. "Loyalty programs can really work," Lynch said. Some of these programs such as the ones supermarkets offer are free to customers who choose to sign up for the loyalty card. There are credit cards that pay up to 6% back on grocery and gas purchases. Some loyalty programs give rewards for buying gas when you purchase groceries. Depending on how many points you accrue, you can save between 20 cents and a dollar per gallon.

Consider several areas to rein in expenses and increase income:

Transportation. Use public transportation, including subways and buses. Buy a certified pre-owned automobile or other used car. "For a new vehicle, save as much as you can for a down payment," Hamrick said. In addition, unless you need a second vehicle, get the trade-in value for your current vehicle. Investigate the best rate for vehicle loans, which often are available from credit unions, he said. Other options are to bike, walk or, when possible, carpool.

Grocery shopping. When possible, buy larger quantities of items you use frequently. "Pick and choose the items you are going to buy in bulk," Daugs said.

Entertainment. Attend community theater or smaller, lower-cost venues. Look for free concerts in your community, visit parks, search out community events that cost less. Use a public library app to read digitally or check out books from your local branch. Rein in spending on discretionary purchases such as travel and luxury goods. If you've been dining out or carrying out, cut down from three times a week to two or less. "We've become a society of convenience and with convenience comes cost," Daugs said.

Cash reserve. If inflation persists, be sure your cash reserve or emergency and rainy-day funds are earning a competitive rate of interest. Keep these funds in a high-yield savings account paying an annual percentage yield of 3.7% and 4.55%.

Social Security. Finally, if you haven't claimed your Social Security retirement benefits yet, and you can wait until at least your full retirement age (between age 66 and 67), you'll create a hedge against outliving your savings.

Postpone retirement. If you're still working, continue for a year or two longer than you may have initially planned. If you've retired, is there a way you can add income by taking on some consulting or part-time work?

Simpler lifestyle. If you are regularly spending down from a 401(k) or traditional IRA (before required minimum distributions begin), consider simplifying your lifestyle. Since you can't change your housing costs overnight, begin thinking about what would be a location and lifestyle that would better fit your needs and budget. Since relocation can take time, begin with the smaller steps already discussed.

"There are lots of things people can do, and it's up to them which levels to pull," Young said.

Harriet Edleson is author of the book, “12 Ways to Retire on Less: Planning an Affordable Future.” A former staff writer/editor/producer for AARP, she has written for The New York Times, The Washington Post and Kiplinger's Retirement Report. Read More