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ForbesAdvisor.com recently reported, \u201cAccording to a 2020 survey from Allianz, nearly half of Americans are worried that rising prices in retirement will cause basic expenses to be unaffordable once they stop working.<\/p>\nForbesAdvisor.com recently reported, \u201cAccording to a 2020 survey from Allianz, nearly half of Americans are worried that rising prices in retirement will cause basic expenses to be unaffordable once they stop working.<\/p>\n
But there\u2019s an interesting wrinkle to that Allianz survey: Actual retirees were much more optimistic about inflation than those still a ways off. For instance, two-thirds of pre-retirees thought inflation would imperil their quality of life, compared to just 40% of actual retirees.\u201d1<\/span><\/span><\/p>\n Why aren\u2019t retirees worried? This group may have a well-kept secret. An average 65 million Americans receive a Social Security check each month with an average monthly benefit of $1,658. That payment averages almost $19,900 per person annually and, if stats hold true, represents one-third to one-half of each person\u2019s retirement income.<\/p>\n Here\u2019s the secret: Those checks adjust for inflation!<\/b><\/p>\n Beyond Social Security benefits, retirees tend to have a diversified portfolio growing their nest egg. According to Boston College Center for Retirement Research, income sources are allocated as such: 60% Social Security, 17% Pension\/401(k), 12% Primary Residence, and 5% Savings\/Tax-advantaged Accounts. Historically, many of these investments use a Vanguard report as a proxy to funnel their money into balanced strategies using stocks and bonds to minimize risk and maximize gains.<\/p>\n The secret here: These investments tend to outperform inflation over time!<\/b><\/p>\n After considering your income and nest egg, it\u2019s worth looking at what retired lifestyles tend to look like. Michael Kitces, Certified Financial Planner, talks about the \u201cend-of-history illusion,\u201d which demonstrates that typically people imagine their retirement life based on their current \u201clikes.\u201d Still, when they retire, they change things up. Some retirees find themselves with less saved than they intended, and others don\u2019t like seeing their nest egg balances go down\u2014either way, they make changes centered on people rather than things.<\/p>\n One more secret: Retirees are spending less than they anticipated!<\/b><\/p>\n With these perspectives in mind, it\u2019s worth noting that a rise in inflation will impact your savings\u2014the time between now and your retirement date determines if there\u2019s time for correction. The average inflation rate in the US from 1961 to 2020 was 3.3%. Since the Pandemic of 2019, that number has exceeded 8%, thanks partly to supply chain issues and consumer demand.2<\/span><\/span> When making retirement plans, this jump in inflation rates may significantly impact your portfolio today and your retirement tomorrow. If you\u2019re feeling anxious, maybe it\u2019s time to reevaluate your financial plan.<\/p>\n Inflation and market changes will always impact your financial plan, so it\u2019s important to know how to react. We\u2019re here to help with your financial plan and can introduce you to other experts that can advise on your investments, if necessary. Call our office today at (540) 720-5656<\/a>.<\/p>\n
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