"Inflation's been low for the last several years, and I think a lot of people are forgetting what a threat it can be," says Patrick Egan, senior investment product specialist for Thrivent Financial for Lutherans.

"If the rate is 4 or 5 percent, that can give you a real (inflation-adjusted) return on bonds of only 1 or 2 percent, or even a negative return in a typical fixed-income return year. But lots of people don't factor that in."

Inflation is a particularly menacing threat to retirees who no longer earn income from working. The good news is that you can protect your assets and extend your money's reach without investing additional principal.

Revisit asset allocation
Closer to retirement, people may consider allocating assets to a more conservative mix. However, inflation and longer life spans mean that today's retirees should not abandon the stock market.

“When you retire, you still need to invest a portion of your money somewhat more aggressively for longer-term growth," Egan says. "You may have to plan on living to age 85 or 90, so if you're retiring at age 65, that can help keep inflation from burning your entire portfolio."

Beware of investing too aggressively—a mistake Egan says is common when retirees feel they haven't saved enough.

"The temptation is to invest really aggressively to make up for lost ground," he says. "But if you run into a bear market within that first five to seven years (as many retirees did when the stock bubble burst), you're withdrawing at the same time the market is losing."

In that situation, Egan recommends a three-step approach: Invest slightly more conservatively, cut your expenses and consider part-time employment.

Consider an annuity
An annuity can offer a guaranteed stream of income for life (or for a specified length of time) which can cut the risk of outliving your money and offer some peace of mind.

“You can use annuities as accumulation vehicles but flip the switch to income generation when you need it,” Egan says. “It’s a nice complement to a mutual fund, to know that you have that annuity investment providing you income, so you can position those mutual funds to provide potential future growth.”

Some types of fixed annuities, says Egan, work like laddered bonds where investors can diversify their interest rate risk among different maturity investments, locking in a guaranteed rate of return that changes in three-year, seven-year and ten-year increments. (Guarantees are backed by the issuing company.)

Plan withdrawals
“People are pretty good at automatically accumulating, but when it comes to taking money out, they don’t know how to do it in a systematic fashion,” Egan says.

Ask your Thrivent Financial representative for help forming your withdrawal and distribution strategies.