Retirement Risk: Inflation
October 3, 2024
It is almost certain that you spent the last few years hearing all about inflation. Some aspects of rising inflation are easy to see. The grocery budget doesn’t go as far as it used to and many other staple products and services have also seen prices steadily increase. In better news, the latest numbers1 show that current inflation rates are on the decline and that the national average is much closer to pre-COVID levels.
But aside from bills being larger or budgets growing tighter, how does the inflation rate affect your retirement plans?
Interestingly, the same rises in inflation that are evident in everyday prices can also work for you. Depending on the makeup of your portfolio, careful and considered investing can give your money the chance to grow at a rate that paces inflation more closely. Having a strategy like this is better than simply stashing assets away in a savings account or a low-interest CD. Similarly, it is important to consider the timing or amount of withdrawals taken when inflation is high. If your withdrawals leave you with excess cash on hand, that is money that could otherwise be working for you and help maintain your buying power.
Here are some inflation-related items to consider.2
Pension
If you receive or plan to receive a pension, know the details. Depending on the structure of your plan, it may or may not be adjusted for inflation.
Social Security
Each year, inflation is considered, and benefit amounts are adjusted for recipients.
Current Situation
Make sure your strategy is aligned with your goals. If retirement is still in the future, more risk in hopes of more growth might be wise. If you are already retired and do not need added risk, keeping up with inflation may not be as urgent an issue.
Contact us today and schedule a complimentary consultation. We can help describe some of the ways the markets can affect the plans you have set for your financial future.