A comprehensive retirement income strategy will help protect your investments from inflationary pressures.  This is because Inflation impacts nearly all retirement-based investing vehicles. Consider this high-level view of some of those most common:

1.  Cash, money market, savings and checking accounts. These instruments are not going to keep up with inflation and taxes, but they are great places for your operating account (day-to-day expenses equal to 1-3 months of living expenses), and your emergency account (equal to 3-6 months of living expenses).  You sacrifice returns for liquidity, but it is a necessary evil for a sound financial plan.

2.  Certificates of Deposit (CDs) and savings bonds. While CDs and bonds are sometimes viable for short to mid-term needs, such as expenses you foresee in the next one to three years, over the long term, these instruments will barely break even with inflation and taxes and should not be part of your long-term investment strategy. And, for short-term purposes, be sure to shop for the best rate as this can vary widely between banks.

3.  Stocks and stock mutual funds. These vehicles are one of the best bets to stay ahead of inflation and taxes, but they do add risk. For retirement planning, these are long-term investments – minimum 5 years and ideally 10 years or more. A well-diversified portfolio of equities, blended with an appropriate mix of short-term bonds and bond mutual funds, can help reduce the inherent risk factor.

4.  Company pension plans and Individual Retirement Accounts (IRAs). These long-term investments are excellent vehicles for equities and Equity Indexed Annuities. Such long-term investments are like growing a tree (the principle) that will provide the fruit (income) to sustain your lifestyle in retirement.

5.  Equity Indexed Annuities. These are considered to be a good option for long-term investments and offer an effective way to stay ahead of inflation and taxes. It is important to shop around as there is a wide variance of returns based on the different interest crediting methodologies. Also consider the strength of the issuing companies as this is another factor critical to success.

6.   Social Security. These benefits typically provide a cost of living increase of approximately 2% a year, which, as noted above, is not enough to keep ahead of inflation and taxes. Although Social Security benefits are not fully taxable, up to 85% of them can be fair game to Uncle Sam and are dependent upon any other income you may receive from investments, pensions,  Required Minimum Distributions (RMDs) and the like. This means the buying power of your Social Security benefits erodes each year, which puts an ever-increasing demand on your nest egg to make up the difference.

7.   Long-term care. While it is true that health care costs, including those for long-term care, are rising at a rate that far exceeds inflation, you do not need to take out exorbitant policies and riders to cover the expense if you assure your other income-based retirement vehicles are appropriately balanced and working in your favor. Rather than pumping too much money into something for which the need is entirely uncertain, it is fine to secure enough insurance to just cover what your anticipated income stream will not. Of course, you must ensure through sound retirement planning that such an income stream will exist.  If your current advisor is not addressing this when developing a retirement income plan, than you should consider taking another look at your existing portfolio.