Inflation- What It Means for Retirement Savings

Presented by Marc Aarons

Hope you are doing well! Many people are concerned about inflation on a national and global level. But a lot of my clients’ concerns are much closer to home. On a personal level, inflation unquestionably affects how much your retirement dollars will be worth. Over time, it can seriously dwindle your nest egg, which is the opposite of the direction you’re trying to go in.

With that in mind, I wanted to reach out today with some helpful guidance regarding inflation’s impact on your retirement. You can also take some steps to mitigate its impact, which I also wanted to share.

Inflation’s impact on retirement

• According to research, a 1% inflation rate over twenty years would eat up $34,406 of your Social Security benefits alone (LIMRA, 2016). If the inflation rate increases to 3%, the difference would be over $117,000.
• In 2018, the Centers for Medicare and Medicaid Services estimated that healthcare expenditures increased by 4.6% over the previous year. Over that same period, inflation averaged 2.4%. Translation? Even when inflation is low, you may be hit harder than others because the expenses that affect you most continue to rise.
• Healthcare isn’t the only thing that can drive up your expenses. Housing, travel, and supporting children and grandchildren also influence how much you spend and how fast your retirement savings deplete.

How to mitigate inflation’s effects

• Consider downsizing. Trading in a larger home for a smaller one, even if the mortgage is paid off, reduces your costs associated with property taxes, utilities, homeowners insurance, and maintenance.
• Expand your investments1. Add investments to your portfolio that may increase in value as inflation rises, such as Real Estate Investment Trusts (REIT) or energy sector stocks.
• Balance with bonds2. Balance stock investments with more conservative options, such as bonds.

Inflation can lessen your retirement savings, but it doesn’t have to affect your dreams for the golden years. Reach out, and let’s pull together a plan to help you overcome inflation’s subtle influence. I’m here and happy to help.

Marc Aarons may be reached at (714) 887-8000 or marc@ocmoneymanagers.com

www.ocmoneymanagers.com

This communication is from Money Managers, Inc. is a Securities and Exchange Commission registered investment advisor.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities, and past performance is not indicative of future results.  Investments involve risk and are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed here.

The information contained in this material is for general information only and are those of the author, and not a recommendation or solicitation to buy or sell investment products. This material was developed and produced by Levitate which is not affiliated with the named broker-dealer. For a comprehensive review of your personal situation, always consult with a tax or legal advisor.

^{1 REITs and energy sector stocks are subject to various risks such as illiquidity and property devaluations based on adverse economic and real estate market conditions and may not be suitable for all investors. A prospectus that discloses all risks, fees and expenses may be obtained from your financial professional. Read the prospectus carefully before investing. This is not a solicitation or offering which can only be made in conjunction with a copy of the prospectus.} 

^{2 The return and principal value of bonds fluctuate with changes in market conditions. If bonds are not held to maturity, they may be worth more or less than their origin.}