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For most Americans, inflation hasn’t been a serious concern for a decade or more. Since 2008, the Consumer Price Index (CPI) has generally risen less than 2 percent a year, well below its historical average of 3 percent.

But inflation is heating up, with the CPI currently running at an annual rate of 2.9 percent. Recent Labor Department data show that wage growth is strong, which could fuel further price hikes, as consumers ramp up spending.

And later this month, the Federal Reserve is expected to raise the fed funds rate, which is aimed at raising borrowing costs in order to rein in inflation. That would be the sixth rate hike in the past two years.

More on Retirement Planning

For younger investors, inflation is not an immediate concern, because future salary growth and savings are likely to offset the impact of higher prices, says David Blanchett, head of retirement research at Morningstar Investment Management. But for anyone within a few years of retirement, or already retired, even a 1 or 2 percentage point rise in inflation can pose a risk to your financial security. Consider this analysis by Blanchett:

Say you have a portfolio that holds 60 percent in stocks and 40 percent in bonds. Also assume you earn a 5 percent annual average return, and that when you enter retirement you initially withdraw 4 percent, adjusted later for inflation that averages 2 percent annually. Over the next 25 years, your odds of retirement success—that is, not running out of money—are 85 percent.

But if inflation climbs just 1 percentage point higher, to 3 percent, your chances of success fall to 72 percent. And if inflation rises to 4 percent, your odds of success will fall to about 50-50.

Of course, no one can predict with any certainty whether inflation will soar in the next few years, or if some other financial shock lies ahead. Your best strategy is to design an all-weather retirement portfolio that can hold up under a wide range of economic conditions, including a surge in inflation, says Fran Kinniry, principal in the investment strategy group at Vanguard. Here are some timely moves to make:

Seek Higher Cash Yields

For older investors, the standard financial advice is to build up your cash savings when you reach retirement. That way, if the stock market hits a downturn, you will have cash to pay the bills, so you can avoiding tapping an already-depleted portfolio for income. Otherwise, your finances may never recover.

There’s a downside to cash, however. Despite recent rate hikes, many bank and money market accounts pay little or no interest. So the more cash you hold, the more you lose in purchasing power to inflation. “Being too cautious can cost you,” says Lou Stanasolovich, founder of Legend Financial Advisors in Pittsburgh.

But if you shop around, you can find higher-yielding options for your savings, particularly at online banks or credit unions. Some online banks are paying 2 percent or more on savings and money market accounts, which can at least help minimize losses to inflation, Stanasolovich says.

You can go to online sites, such as Bankrate.com or NerdWallet.com, to see which institutions offer appealing rates. And for more strategies on identifying places to put your cash, check out the advice here.

Keep Stocks in Your Asset Mix

It's essential to hold a significant portion of your portfolio in stocks for growth. As Morningstar data show, since World War II the S&P 500 stock index has returned 11.1 percent, which is 7 percentage points more than the CPI. Even if future returns don't match those gains (more on that below), equities are still likely to outperform other assets over the long term.

Of course, you also need bonds in your portfolio, because these issues provide an income cushion during market downturns. But when rates rise, bonds fall in price, which makes them tricky to own in times of inflation, Stanasolovich says. That’s why holding a balanced portfolio—one that holds a mix of stocks and bonds—is the best way to navigate changing economic cycles.

“A 50-50 stock and bond mix, which gives you growth and income, is a good starting point for retirees,” Blanchett says. Still, you will want to customize your asset mix, based on your individual financial situation. You can find advice on designing a retirement portfolio here.

Add Some TIPS

There’s no perfect hedge against rising prices, but Treasury inflation protected securities, or TIPS, come pretty close. “TIPs are the only investment that is guaranteed to track inflation," says Vanguard's Kinniry.

With TIPS, the bond’s principal value is adjusted every six months to keep up with inflation, as measured by the CPI. You can invest in TIPS through mutual funds or exchange traded funds (ETFs). You can also buy individual bonds at TreasuryDirect.gov

Like regular bonds, TIPS' prices can rise in fall or rise in response to interest rate changes, which often don't move in sync with inflation. That's why Kinniry recommends that those in or near retirement invest a portion of their fixed-income stake in a short-term TIPS fund.

“With their shorter maturities, these funds are very quick to react to inflation,” Kinniry says. Short-term TIPS funds are also less volatile than their longer-maturity peers when interest rates are moving up and down.

The Vanguard Retirement Income fund (VTINX), which is designed for investors in retirement, recently held 25 percent of its fixed-income stake in a short-term TIPS fund.

Choose a Realistic Withdrawal Strategy

When it comes to choosing how much income to pull from their portfolios, many retirees have relied on the 4 percent rule, which was used in the example above. It’s a strategy that has worked in many past market cycles.

But what’s worked historically may not work in the future. After a long-running bull market, stock returns are likely to be lower in the future, and bonds may lag as interest rates rise, Blanchett says. That's why he recommends that cautious retirees may want to start with a 3 percent withdrawal rate.

If that seems too low for your needs, you can start with 4 percent, Blanchett says, but you'll need to remain flexible and be willing to skip inflation adjustments if the market drops.

There is some good news, though. Your Social Security payments are adjusted for the cost of living each year based on the CPI. And thanks to inflation, the next Social Security COLA, which will be announced in October, may be larger than in recent years. Once in a while, inflation can work in your favor.