• Use a conservative inflation rate when planning for retirement. You don't want to run out of money during retirement. So when calculating how much to accumulate by retirement age and how much to withdraw during retirement, use a conservative inflation rate. While inflation has averaged 2.5% over the past 10 years, it has averaged 3.9% over the past 30 years (Source: Bureau of Labor Statistics, 2009).

• Determine how much of your retirement income is indexed for inflation. Social Security benefits are currently indexed for inflation, but most defined-benefit pension plans do not make adjustments for inflation. Thus, other income sources will have to fill an increasing income gap over time.

• Invest in tax-advantaged retirement vehicles. Look into 401(k) plans, individual retirement accounts, and other retirement vehicles. While each has different rules for taxing contributions and earnings, all provide some tax-free or tax-deferred benefits. Since you aren't paying income taxes on earnings during the years, that typically means you'll have a larger balance at retirement.

• Choose investments carefully. To avoid losing purchasing power, your after-tax rate of return should be higher than the inflation rate. Review your investments annually to make sure you aren't losing purchasing power.