One of the leading financial regrets among retirees is wishing they had prioritized saving during their working years. However, several years of persistent inflation and skyrocketing consumer prices have made making ends meet difficult for many American households.
Unfortunately, saving for retirement has become harder to balance with competing financial obligations. However, most experts note that consistently contributing to your 401(k), IRA, or 403(b) accounts from a young age is the most ironclad retirement strategy.
Related: Social Security benefits report confirms major changes are 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 during retirement. He highlights the importance of saving while investing in products that outpace inflation.
Saving for retirement early will set you up for long-term success
Edelman notes that not saving for retirement earlier is a universal regret among retirees.
“Everybody wishes they'd started saving in their twenties, and nobody did,” He said. “That's clearly the biggest regret.”
“It's a real dilemma because we can't rewind the clock. So if you are among those who regret that you didn't start sooner and haven't accumulated as much in savings as you wish, you're going to have to do two things — and you're not going to like either one of these.”
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Edelman explains that the path to generating more income in retirement is doable, although it likely won’t be enjoyable.
“You're going to have to keep working longer, and you're going to have to throw more money into savings than you may feel you can afford to,” he said. “There's really not much of a choice except to reduce your expenses. Even getting radical, selling your house and downsizing that major expense — not many people want to do that.”
If you're not on pace to meet retirement goals, Edelman notes the importance of having an aggressive saving and investment strategy as soon as possible.
“We really don't have a choice but to save more, work longer, and ensure you're investing for higher returns,” he explained.
“Because if you're going to take all that extra work and savings and put it in a bank account at 3%, you're never going to accomplish the goal. So you've got to stay invested in the financial markets to have any hope of accumulating the money you're going to need.”
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How to invest in products that will offset the impacts of inflation and taxes
“We have to recognize that inflation is a fact of life,” he said. “We've gone through 4 or 5 years of horrible inflation, and those high prices will linger for many years to come.”
Edelman addresses the importance of factoring inflation and cost of living into your financial planning. Although the government issues cost of living adjustments for Social Security, investment returns do not have the same safeguard built in.
Related: The average American faces one major 401(k) retirement dilemma
“So we have to acknowledge that the cost of living continues to rise, and that means our money has to earn a return higher than the cost of living.”
Looking toward other investment products, such as real estate, metals, or digital assets, may be the answer for investors with a higher risk appetite. Although the returns could be higher, those markets can be more volatile.
“When we have to look at the returns across the various asset classes — stocks, bonds, real estate, gold, oil, crypto — as well as bank accounts, money market funds, and treasuries,” he explains.
“We've got to choose those that have the greatest opportunity for beating the inflation rate, especially adding in the impact of taxes, because taxes are a big factor, and they're likely to rise over the next several years,” he said. “We have to overcome the combination of inflation and taxation to generate a real rate of return. It makes it more difficult; there's no question about it.”
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