"Our monthly income was more than enough when we retired, but with the rising cost of gas, property taxes and even consumer goods, it just doesn't seem to be going as far as it used to." And he's right: it isn't.

Even though U.S. inflation rates have remained low (just 4%) over the last 50 years, that's still high enough to take a big chunk out of a retirees fixed income 5, 10 or 20 years down the line. If inflation holds steady, someone retiring today will discover that the monthly stipend they receive in 2007 for retirement living will be worth less than half that amount in 20 short years. This is especially tough for those living on fixed incomes from pensions, retirement savings plans, or social security payments.

If inflation is so low- and has been for decades - why is it hitting today's retirees so much harder than those in the past? The answer, according to financial experts is simple: we're living longer. In the past, when people retired in their sixties, and died in their mid to late 70's, they only needed to live on their retirement savings for 10, maybe 15 years. Today's worker is retiring earlier, and living longer, making the long-term effects of minimal inflation detrimental. And, with inflation expected to rise in the coming years, nearly 77 million seniors set to retire in the next decade or so need to be prepared.

While it is important for those entering (or in) retirement to pull back the majority of their investment income from high-risk to a safer investment strategy, most financial experts agree that it is not the time to let your money sit idling making bare minimum profits.

Most agree that diversifying in a more moderate risk portfolio will yield a better chance of maintaining the income level you'll need in the future, while still maintaining a low enough risk to weather any short-term market fluctuations. The danger for many, however, is risking too much for too long. Watch the market carefully, and get out quickly when you begin to feel nervous. Don't be greedy, but don't be so conservative that you lose out on a few good opportunities, the experts warn.

Another important tip: always keep 1-5 years worth of living expenses in a low-yield and safe investment category to allow you the time (and money) to get through a short-term market spiral. Even if the market is hesitant to rebound, you'll have the time to come up with a plan.

Rising inflation doesn't have to put an end to your carefree retirement days - but it can put a crimp in them. Plan carefully and watch the market to ensure that you don't get stuck pinching pennies in your twilight years.