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Don’t Ignore Inflation as it Relates to your Planning

For many years, we have been experiencing inflation in the healthcare industry.  Now we are seeing inflation in the housing market, at the grocery store, gas pump and entertainment. Portfolio Manager Greg Pierce feels that inflation will be here for a prolonged period.

Inflation can eat away at your retirement income. You may need to cut out luxuries, travel plans or the second home you planned. It can erode the purchasing power of your retirement savings and can impact your ability to live well during your retirement years. Inflation is a major issue and doing nothing could put your future plans at risk.

How inflation may hurt your retirement plan investment strategy

It’s important to understand and educate yourself on how inflation may hurt your retirement plan investment strategy. During retirement years, portfolios tend to be more risk adverse by adding bonds or more cash. Bonds are generally the most vulnerable to inflation risk because their payments are usually based on fixed interest rates. Cash is the most noticeable. A person’s cash will not be able to buy as much in one, 10 or 20 years into the future. A person might need to take more stock risk than planned. Finding the right investments can be challenging and best left up to a qualified and experienced investment advisor.

Stress testing your financial plan and adjusting your investment portfolio can help eliminate stress and ensure your investments keep up with rising costs.

Prepare for inflation

Your financial advisor or investment advisor can help prepare for inflation by:

  • Helping adjust your budget to meet near-term financial goals and long-term retirement goals
  • Stress testing your financial plan to help you stay on track to meet your retirement goals 
  • Factoring inflation into your investment choices
  • Rebalancing, diversifying or adding to your portfolio asset classes and investments that have historically fared well during periods of rising inflation

Inflation has a huge influence on our financial lives but should not be a retirement killer. Take the time to meet with financial experts Gregory Pierce or Kim Molitor who can help develop or update a financial plan to beat inflation and ensure you the ability to live well during your retirement years.