Inflation got you putting off retirement? Buying ASX 200 dividend shares now could help

Are you looking to retire in the near future but concerned about the potential impacts of inflation? One way to take charge is to invest in inflation hedges such as some S&P/ASX 200 Index (ASX: XJO) dividend shares.

ASX 200 dividend shares as retirement inflation protection

Why I would consider inflation when planning my retirement

Inflation has been the talk of the ASX town in 2022 as its impacts wreak havoc on global economies and consumers’ hip pockets.

But why should Aussies looking to retire consider inflation?

Well, inflation causes the prices of goods and services to increase. As a result, a person’s cash savings will command less and less purchasing power as the years go by.

That means what might have once been a healthy retirement savings account might not be as helpful years or decades after its holder retires.

Fortunately, investing in inflation hedges can help to protect savings from such pressures.

What are inflation hedges?

An inflation hedge is an asset that is generally immune from inflation or can provide returns greater than the inflation rate.

Gold, for instance, is often heralded as an inflation hedge as its value tends to rise alongside the measure. Property can also be an inflation hedge if its value climbs by the same rate or higher than inflation.

Finally, ASX 200 dividend shares can be a comparatively simple inflation hedge for investors to take advantage of.

Though, it’s worth mentioning that no investment is guaranteed to provide returns nor capital protection.

ASX 200 dividend shares as an inflation hedge

If I were about to retire and worried about inflation, I would consider investing in ASX 200 dividend shares.

Not only do they have the potential to provide capital returns – in the form of rising share prices – but they can also offer cash dividends, while many ASX 200 blue-chip stocks might provide greater stability than, say, growth shares.

Of course, that means ASX 200 dividend stocks have the capability to protect an initial investment while also providing passive income. Though, neither can be guaranteed.

Dividends generally represent a portion of a company’s profits in a particular period. Thus, a company’s dividends can also grow alongside its business. If that is the case, even a person’s passive income could be protected from inflation.

And right now, some ASX 200 shares are likely trading at bargain prices, having been driven down alongside the index. It’s down nearly 6% year to date. Though, it provided an average annual return of 6.6% over the 10 years ended 2021.

If I were seeking out ASX 200 dividend shares to buy, I’d be looking for quality stocks trading at cheap prices compared to their underlying valuations. I would also be looking to build a diverse portfolio. Doing so will help protect against single-sector or company downturns.

The post Inflation got you putting off retirement? Buying ASX 200 dividend shares now could help appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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