4 low-risk inflation strategies

The values for TIPS and I bonds reset twice a year. Of course, the federal government fully backs TIPS and I bonds.

"It makes them a pretty safe investment," says Kresh.

3. Keep a sliver -- or more -- of stocks

Some investors may want to lower the amount of risk in their portfolio. But that doesn't mean they should shun equity investments entirely, says Richard Staszak, a financial adviser and estate planner in Pittsburgh.

Staszak advises retirees to put at least some of their money -- typically, cash they won't need for at least five years -- into stocks instead of traditionally low-yielding investments.

"If you have money that you don't plan to use for the next five to 10 years, why should you penalize yourself in an investment vehicle that pays only a half a point percent?" Staszak says.

“There's no way to get a real rate of return without taking some sort of financial risk.”

Bill Losey -- a Certified Financial Planner in Wilton, N.Y., and author of "Retire in a Weekend!" -- agrees.

"People are going to be living in retirement for 20 (to) 40 years," he says. "Even at an inflation rate of only 3 percent per year, you'd need to have about double your current income in 20 years just to maintain the same standard of living you have today."

Losey says that while there is no guarantee the market will perform as well as it has in the past, "the stock market has been the only place that has consistently delivered returns above inflation over a consistently long period of time."

Losey acknowledges that investors may need to keep some money in low-yield investments. But he adds that many people don't consider their long-term needs.

"Unfortunately, I'm seeing people who are panicking and taking all of their money out of the stock market," he says. "They're changing their entire investment philosophy to a 'preservation of capital' strategy.

"That's a real dumb move, and you can quote me on that."

Losey notes that he often meets people in their mid-to-late 70s who made similar mistakes in the past.

"They tell me, 'I retired 15 years ago and was defensive with my investments because I didn't want to take risks."

The result?

"They're blowing through their savings accounts and can't maintain their standard of living because their costs have increased," Losey says.

4. Stay the course?

Balancing concerns about inflation with worries over investment risk means different things to different people. While retired investors might take a cautious approach, it could be a different story for investors with a longer time horizon.

Younger investors should manage instability by building a stash of emergency cash and committing to invest a set amount of money consistently, says Larry Rosenthal, a Certified Financial Planner and president of Financial Planning Services in Manassas, Va.

"My advice is to get back to basics," he says. "Maintain adequate cash reserves and use dollar cost averaging for investing.

"When we have economic expansion, it can create volatility in stocks, especially if inflation increases. Younger investors can start dollar cost averaging now to limit volatility concerns."

Ringquist says investors should resist the urge to follow the investment crowd unless the move helps them reach financial targets. This is true regardless of whether the economic climate is unstable or calm.

"You have to ask yourself what is more important -- beating some index or achieving your retirement income objective," he says. "Returns on a portfolio are meaningless outside of the context of what your investments are doing to meet your goals."


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