Invest enough while you are working. Social Security will not be enough; our life expectancy at 65 is eighteen years. Moderate inflation will take a big bite from our money's value; 3% over 18 years is a loss of 41 cents per dollar. Your assets should be large enough to generate earnings for your expenses and some left for re-investment. This re-investment will help to keep increasing your earnings over time.
How much investment is enough? How much do you need, in or outside of your IRA's be? This isn't easy to figure out. When I build a retirement plan, I test it with different rates of inflation, different rates of return on IRA's, etc. I use software that permits me to index inflation into Social Security benefits, adjust PERS payments, etc.
Lenders lose from inflation*, because the money that is paid back buys less. Currently, 20-year US Treasuries are paying a little over three percent. If inflation were to to increase above this level, the owners could lose substantial amounts of money. The longer the maturity of the bond, the higher the risk of loss from inflation. Long-term bonds pay a bit more because of this risk.If you have fixed income assets (an annuity, long-term bonds or a pension), it makes sense to counter-balance them with assets that are more flexible. Keep some short-term and intermediate bonds in your mix.Bonds are often divided by duration into short-term (1-2 years), intermediate (3-7 years) and long term (8-30 years). The holdings information on any bond mutual fund will indicate average duration or maturity.
You can use other types of assets to produce income. You can receive income from stock dividends, REIT's(see below), or a strategy of selling covered calls. Keep assets that adjust to inflation.Companies can adjust the prices of their goods or services for inflation; holding their shares can give protection from inflation. Their dividends and stock prices often go up with inflation. Rents may increase from inflation. A REIT or Real Estate Investment Trust has property that can inflate in price. Companies that deal in commodities (agriculture, energy, mining and forestry) are generally expected to do well in inflation. You can hold these as stocks, mutual funds or in Exchange-Traded Funds (ETFs).
Foreign companies are generally more resistant to US inflation. They have other risks, but this is always true of diversification. Keep your mortgage, if it is affordable, low interest and long-term. You may wish to keep it because you will be paying back with dollars of lower purchasing-power. (See #2.) Keeping your mortgage may seem counter-intuitive, but the math bears this out. Paying your mortgage early or putting an equivalent amount in your 401(k)/403(b) will both increase your net worth. Your mortgage rate, rate of return on your Retirement Plan, whether you are deducting your mortgage interest and your tax bracket all factor into this. If you decide to buy long term care insurance, also buy the 5% inflation rider.