What is inflation protection in retirement planning?

Inflation protection in retirement planning refers to strategies designed to ensure that retirees can maintain their purchasing power over time, despite the rising cost of living due to inflation. This is crucial because, as prices for goods and services increase, the value of fixed incomes—like pensions or certain types of savings—can diminish, effectively reducing what retirees can afford to buy.

By focusing on strategies that address inflation, such as investing in assets that typically outpace inflation (like stocks, real estate, or inflation-linked bonds), retirees can better safeguard their financial well-being throughout retirement. These strategies are vital for ensuring that the money saved and invested can keep up with or exceed inflation rates, allowing retirees to enjoy a secure lifestyle even as expenses rise.

While other options may touch on aspects of a financial strategy, they do not encompass the broader, more effective approach needed to counteract inflation's impact on purchasing power.