What experts say to do if inflation has you worried about retirement
[ad_1]
E+ | E+ | Getty Images
You might be worried about your retirement because of inflation.
Everything from housing to food has seen prices rise. The Consumer Price Index measures prices for goods and services. It reached an all-time high of 1. 8.3% increaseIn from one year before.
Actually, 70% of AmericansAccording to a survey by, inflation is deemed “very big problem” in the country. Pew Research.
Some seniors are opting to continue their independence. put off retiringThirteen Percent of Gen Xers, and Baby Boomers, said that they have delayed or thought about delaying their plans to retire from work due to rising costs. This is according to a poll by The Nationwide Retirement Institute found.
When you consider the volatility of stock markets, it is possible for those planning to retire may have to reconsider their investment strategies.
More information from Invest in You
The ultimate retirement planning guide for 2022
How to calculate your personal inflation rate amid rising prices
40% of investors who pulled money out of markets regret it
Tom Henske, who is a New York-based certified Financial Planner, stated that investing in equities can be a good way to protect against inflation.
He explained that one of the reasons to invest is to preserve your purchasing power.
With inflation, cash’s value decreases. You may be affected by inflation. However, equity investments have generally held up against inflation for the past three decades according to a 2020 analysis done by U.S Bank Asset Management Group.
Here are some steps to help protect your retirement savings portfolio in light of high inflation and volatility in stock markets.
Continue to contribute
CFP: If your income isn’t declining, you can continue contributing to your retirement account. Marguerita ChengBlue Ocean Global Wealth, Gaithersburg, Maryland, is headed by.
You are taking full advantage of your employer-sponsored plans. dollar-cost averaging“
This means that you invest your money in equal amounts at regular intervals regardless of the market’s performance. It reduces risk, but it may not yield the same returns as lump-sum investing.
You can benefit from a Roth 401k, Roth 403b or Roth TSP (thrift savings plan) if you’re over 50. This is the maximum amount you can contribute to your account for 2022. It’s $6,500. The contributions are taxed, and you won’t be charged when you withdraw your money.
Cheng (a member of The Advisory Board) stated that tax diversification was important. CNBC Financial Advisor Council.
You should definitely consider building a retirement income source that is tax-free.
Cash is your best friend
In the case of emergency, it is important to keep cash reserves. You don’t need to access any stocks or assets to get money if your savings account is not linked with investments.
Take control of your emotions
Emotions can lead to emotional mistakes that could have a negative impact on your retirement savings. However, you should always check your emotions before making any decisions.
Cheng suggests asset-allocation or target-date fund options for those who are unsure of their ability to do this.
Target-date fundsPut your savings on autopilot. The system will adjust to suit your target retirement date. A portfolio of assets is diversified across various asset classes.
Be diversified
jayk7 | Moment | Getty Images
Cheng stated that your portfolio should include a mixture of stocks and bonds. The allocation should also be determined by risk tolerance, cash flow needs, taxes and time horizon.
For bonds that are held until maturity, they pay a yield. She advised that bonds can be diversified in terms of quality, credit and maturity.
In some cases, you can even invest part of your fixed-income income. Treasury inflation-protected securities. The U.S. government backs TIPS, just like traditional Treasury bonds. TIPS are able to protect against inflation since the principal changes as inflation is measured using the Consumer Price Index.
Cheng stated that your portfolio should include growth stocks, value stocks, mutual funds and exchange-traded funds. She also suggested that you consider dividend-paying companies, which could help to weather volatility.
“Large companies that have a long history of paying consistent dividends each year have something to their advantage in an inflationary environment: They can weather — and actually benefit — from higher prices,” Cheng explained.
There are also assets which are considered to be inflation-hedges. These include gold, other commodities and real estate investment trusts. Henske explained that it is up to you to decide whether to add these assets to your portfolio or how much.
According to him, “The farther you are from having to borrow money, the more equity you have in the portfolio,”
Henske explained that you will likely build some hedges as you near retirement. TIPS and gold are good options.
He said, “You should do all things in moderation because there is no way to predict what will happen.” We don’t know the outcome.
SIGN UP Money 101 is an 8-week learning course to financial freedom, delivered weekly to your inbox. Spanish Version Dinero 101, click here.
CHECK OUT: Meet a 34-year-old who has sold over 11,000 items on Etsy and makes nearly $3,500/month in passive incomeWith Acorns+CNBC
Disclosure: Comcast Ventures is an investor in NBCUniversal. Acorns.
[ad_2]