Why inflation can be a big deal in retirement—especially for new retirees.
Timestamps
00:00 Introduction
01:08 Why Inflation Can Be a Big Deal in Retirement
03:27 Inflation Protection: A Harder Problem
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Christine Benz
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Inflation, inflation rate, rising inflation, retirement planning, retirement, early retirement, stock rising inflation expectations…(read more)
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Inflation can pose a significant threat to your retirement savings, as it erodes the purchasing power of your money over time. If you’re currently retired or nearing retirement, it’s essential to take steps to protect your assets from the effects of inflation. Here are some strategies to help safeguard your retirement funds:
1. Diversify Your Investments: One of the most effective ways to protect your retirement assets from inflation is to diversify your investment portfolio. By spreading your investments across different asset classes such as stocks, bonds, real estate, and commodities, you can reduce the impact of inflation on your overall portfolio. Diversification can help you offset potential losses in one asset class with gains in another, providing a more stable and resilient investment strategy.
2. Invest in Inflation-Adjusted Securities: Consider adding inflation-adjusted securities to your investment portfolio, such as Treasury Inflation-Protected Securities (TIPS) or inflation-indexed annuities. These investment vehicles are designed to provide a hedge against inflation by adjusting their principal or payouts with changes in the Consumer Price Index (CPI). By including these assets in your portfolio, you can help ensure that your retirement income keeps pace with rising prices.
3. Maintain a Mix of Stocks and Bonds: Stocks have historically outperformed inflation over the long term, making them a valuable component of your retirement portfolio. While stocks can be more volatile, they offer the potential for higher returns that can help you stay ahead of inflation. On the other hand, bonds can provide stability and income, serving as a buffer against market volatility. By maintaining a balanced mix of stocks and bonds, you can benefit from both growth potential and downside protection for your retirement assets.
4. Consider Real Assets: Investing in real assets such as real estate, commodities, and infrastructure can also offer protection against inflation. These assets have intrinsic value and tend to appreciate with inflation, making them a valuable addition to your retirement portfolio. Real assets can provide diversification and act as a natural inflation hedge, helping to preserve the purchasing power of your retirement savings.
5. Reassess Your Retirement Income Strategy: Inflation can erode the value of fixed income sources such as pensions, annuities, and Social Security benefits over time. To protect your retirement income from inflation, consider incorporating flexible and adjustable sources of income, such as part-time work, dividends from stocks, or rental income from real estate investments. By having a diversified mix of income sources, you can better withstand the impact of inflation on your retirement finances.
6. Monitor Your Expenses: Lastly, keeping a close eye on your expenses is crucial for protecting your retirement assets from inflation. As prices rise, your spending power diminishes, and it’s important to adjust your budget accordingly. By managing your expenses and making prudent financial choices, you can help stretch your retirement savings further and mitigate the effects of inflation on your overall financial well-being.
In conclusion, protecting your retirement assets from inflation requires a proactive and diversified investment approach. By incorporating a mix of assets that are resilient to inflation, adjusting your income strategy, and monitoring your expenses, you can help safeguard your retirement savings from the erosive effects of inflation. Consult with a financial advisor to develop a comprehensive inflation protection plan that aligns with your retirement goals and risk tolerance.
We experienced the peak of our era, and now it is gone. Recession is tanking everything including 401K. My retirement equities portfolio of $750K is in the reds. I keep losing because of inflation. This world will fall to the corrupt rulers in the same way that Rome did. I'm sorry if you're thinking about retiring and you're worried that your pension won't be enough to meet the rising cost of living. Horrible foreign policies everywhere, bad regulatory policy, bad fiscal policy, and bad energy policy.
At this moment, it is crucial for individuals to prioritize investing in alternative streams of income that are not connecting on the government, particularly with the existing worldwide economic crisis. Investing in stocks, gold, silver, and digital currencies can still be profitable during this period. Therefore, it is advisable to explore these investment options to secure one's financial future.
People grappling with the difficulty of meeting essential expenses often encounter this situation due to inadequate savings during their working years. The decisions taken in readiness for retirement carry extensive consequences, as demonstrated within my own family dynamics. Despite my wife and i having equal tenure in civil service, differing investment approaches yielded disparate results. Guided by a financial advisor, We are both retired and still earn monthly from our investments.
IF you have reason to believe its high??? Lol why would anyone believe it would be low???
Christine Benz is one sharp lady when it comes to all things financial planning!
Broad based inflation is always and everywhere a product of government policy, i.e. monetary and fiscal policies. Inflation exists because governments want it to. Otherwise, we would still be on the gold standard. As inflation is a product of government policy, buying TIPS is a bit like buying fire insurance from a suspected arsonist. There is a conflict of interest, to put it mildly. With inflation ultimately monetary in nature, currency diversification is always good plan. Stocks tend to hold up well over the long term, though in the near term they can be extremely volatile. Holding a low-cost international stock index fund/etf is a good hedge. Commodities that people will always need regardless of the economic environment is another good hedge. Examples might include energy/fuel, food and medicine or related stocks. Gold and silver have also been traditional hedges against currency volatility and/or some other serious crisis. While they have no internal rate of return, they have a near universally recognized standing as a store of value that goes back for many thousands of years. I see gold as a diversifier for cash reserves, with the difference being that, unlike dollars, gold is impervious to the knavery of politicians and central bankers. No one can push a button and print a trillion ounces of gold.