If you’re a retiree, here’s how to assess your portfolio’s inflation risk

These are the three questions retirees should ask themselves to asses their portfolio’s inflation risk.

Inflation can be scary for retirees. True, Social Security provides inflation increases in line with the consumer price index, or CPI. But any portfolio income, save allocations to inflation-protected bonds, isn’t inherently inflation-protected. And if inflation occurs early in your retirement, those higher prices will do more damage throughout retirement, potentially jeopardizing your portfolio’s ability to last.To gauge your inflation risk and how strenuously you need to defend against it, ask yourself three questions.

1. Where are you spending?

You may not have stopped to consider it before, but CPI is meant to capture the spending experiences of all consumers. Categories like housing receive the biggest weighting in the CPI calculation, while recreation and apparel get smaller weightings.But a retired older adult who no longer has a mortgage will likely have smaller housing-related outlays, as a percentage of household spending, than the general population, but healthcare expenditures may well be a bigger share of the budget.Given those variations, it can be helpful to use the CPI’s weightings as a starting point for understanding inflation’s impact on your household. But you can get closer to a personal inflation rate by looking at your actual spending in each of the major categories alongside the........

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