Is your retirement plan consultant keeping rapid inflation in mind?
Inflation has reached its highest point since the economic crisis of the 1970s. If you are nearing the age of retirement, you probably remember inflation creeping steadily upward until it reached an all-time high of 14% in 1980. Increases in government spending due to war, combined with disruptions in oil supplies and skyrocketing meat prices, all contributed to the crisis. The situation we faced back then eerily mirrors some of the situation we find ourselves in today.
While today’s rapid inflation may not reach those levels, many investors are worried about how their retirement plan may be affected. That is why it is more important than ever to work with a retirement plan consultant who can help you overcome these challenges. If your consultant is not keeping rapid inflation in mind, your retirement plan could suffer as a result.
How could rapid inflation be affecting my retirement plan?
Your retirement plan consultant needs to ensure that your investments and savings will have enough purchasing power to meet your retirement goals. This includes accounting for hurdles such as inflation, which can erode the purchasing power that your money will have in the future.
Here are a few signs that your consultant isn’t keeping rapid inflation in mind:
1.Not diversifying your investments — A portfolio that is diverse can help to protect your savings from inflation. Experts recommend including a combination of many kinds of assets. These should include large, mid and small capitalization stocks and bonds. International investments are also a good way to hedge against inflation.
2. Not choosing investments that are inflation resistant — During periods of high inflation, long-term, fixed-rate investments may not be a good fit. These kinds of investments drop in value when interest rates rise. This is because investors opt for short-term, high-yield alternatives instead.
There are several investments that your retirement plan consultant should be choosing during rising inflation. Real estate and Treasury Inflation-Protected Securities (TIPS) are just a few investments that are typically resistant to inflation.
3. Not securing long-term care insurance — Approximately 70% of adults who are nearing the age of retirement today will require long-term care, according to the U.S. Department of Health and Human Services. Long-term care insurance helps to protect your retirement savings from the costs of long-term care. However, it is important to choose a plan that protects you from the effects of inflation.
Since long-term care insurance isn’t normally provided by employers, investors will need to purchase their own plans. Many stand-alone plans include options such as automatic compound benefits growth to protect against rising inflation. Your retirement plan consultant could also recommend long-term care annuities that come with compound inflation protection.
Talk to a ProVise CFP® professional about your current retirement plan and how our consultants can help you protect against inflation
At ProVise Management Group, our CERTIFIED FINANCIAL PLANNER™ professionals get to know you and your current financial circumstances, goals, risk tolerance and personal values to help you develop a plan that works for you. We can also create a written plan for you at a fiduciary standard of care. All our written plans come with an unconditional money-back guarantee. If you are unhappy with your written plan, you can return it to us, and we will refund 100% of the fee paid.
Are you ready to talk to a professional about planning for the future? Contact ProVise today to schedule a complimentary consultation.