How to offset inflation risk and save more for retirement

One of the top financial regrets among retirees is that they wish they had prioritized saving during their working years. However, several years of persistent inflation and skyrocketing consumer prices have left many American households strapped for cash.

Unfortunately, saving for retirement has become harder to balance with competing financial obligations. However, most experts note that steadily contributing to your 401(k), IRA or 403(b) accounts from a young age is the most solid retirement strategy.

Related: Social Security benefits report confirms big changes coming

We spoke with Ric Edelman, founder of Edelman Financial Engines and The Truth About Your Future, to examine the best ways to fight inflation and avoid regrets in retirement. He emphasizes the importance of saving while investing in products that beat inflation.

Saving for early retirement will set you up for long-term success

Edelman notes that not saving for retirement sooner is a universal regret among retirees.

“Everybody wishes they had started saving in their twenties, and nobody did,” he said. “This is clearly the biggest regret.”

“It’s a real dilemma because we can’t turn back the clock. So if you’re one of those people who regrets not starting sooner and building up as much savings as you’d like, you’re going to have to do two things – and you won’t like either of them.”

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Edelman explains that the path to generating more income in retirement is doable, though it likely won’t be pleasant.

“You’re going to have to keep working harder and you’re going to have to throw more money into savings than you can afford,” he said. “There really aren’t many options but to cut your expenses. Even going radical, selling your house and cutting back on the major expense – not many people want to do that.”

If you’re not on pace to meet your retirement goals, Edelman notes the importance of having an aggressive saving and investing strategy as soon as possible.

“We have no choice but to save more, work harder and make sure you invest for higher returns,” he explained.

“Because if you take all your extra work and savings and put it in a bank account at 3%, you’ll never reach your goal. So you have to stay invested in the financial markets to have any hope of accumulating the money you will need.”

A retired couple is seen holding hands and walking on a beach.

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How to invest in products that will offset the impact of inflation and taxes

“We have to recognize that inflation is a fact of life,” he said. “We’ve had 4 or 5 years of horrendous inflation, and those high prices will continue for many years to come.”

Edelman addresses the importance of factoring inflation and the cost of living into your financial planning. Although the government issues cost-of-living adjustments for Social Security, investment returns don’t have the same built-in guarantee.

Related: The average American faces a major retirement 401(k) dilemma.

“So we have to recognize that the cost of living continues to rise, and that means our money has to earn a higher return than the cost of living.”

Looking to other investment products such as real estate, metals or digital assets may be the answer for investors with a higher appetite for risk. While returns might be higher, those markets can be more volatile.

“When we need to look at the returns of different asset classes – stocks, bonds, real estate, gold, oil, crypto – as well as bank accounts, money market funds and treasuries,” he explains.

“We need to pick the ones that have the best chance of beating the rate of inflation, especially adding the impact of taxes, because taxes are a big factor and are likely to increase over the next few years,” he said. . “We need to overcome the combination of inflation and taxation to generate a real rate of return. It makes it more difficult; there’s no doubt about it.”

Related: Veteran fund manager sees world of pain coming for stocks