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How Will Inflation Affect Your Retirement?

June 21, 2023

While curbing the effects of inflation has a short-term negative effect on the stock market, not doing so would have serious consequences for the health of the dollar. This is a serious issue, and it is hard to predict how far and for how long this will damage the economy. As of now, keep in touch with the movement of the stock market, but more importantly, check in with a qualified financial advisor to ensure you position yourself with your best interests in mind.   

How Will Inflation Affect My Retirement?

On March 9, 2020, the United States witnessed one of the sharpest market crashes in modern history, with the Nasdaq tumbling more than 3000 points from February to March alone. Luckily, after the sudden drops hit hard, there was an equally positive rebound. By June 2020, the NASDAQ traded at the same height as before the pandemic. Afterward, it pushed to new highs, peaking at over 16,000 points.  

Recently, however, a new sudden economic downturn has changed the forecast. From January 2022 through December 2022, we saw a continuous drop ending the year a little over 10,500. 2023 has seen some positivity with a rise of over 3000 points as of June 2023.

The reason behind the fluctuations is due to the FEDs suggestion that it will take aggressive action to slow the rising cost of consumer goods. Since March 2022, the Fed has hiked its benchmark federal funds rate at 10 straight meetings by a total of 5 percentage points. For the first time since January 2022, The Fed decided to hold its key rate steady. While the Federal Reserve signaled two more increases are likely this year as officials continue to battle high inflation, there is still hope as the central bank expects to cut rates to 4.6% amid a weak economy and lower inflation by 2024.

Review Your Plan 

For those who already have a retirement plan in place, stay committed. The plan you have in place was likely created to withstand any drastic shifts in the market. If you are experiencing any degree of uncertainty regarding your current strategy, now is a great time to speak with a qualified financial advisor. If you do not have a financial advisor or have concerns with your current financial plan, be sure to check out some of our other blogposts on what to ask andhow to choose a potential investment advisor! 

Stay the Course 

If you are planning to retire 8-10 years from now, financial professionals recommend that you do not allow the initial shock of a market downturn to influence your current retirement strategy. Draining your accounts is generally not recommended. Regardless of how bad the market looks at the moment, it’s widely suggested that thegreatest mistake for an investor to make at this time is to buy high and sell low. In other words, do not let the fear and anxiety of the current economic state dictate your decision to sell your investments at low prices and settle for losses. Instead, be patient! Give the market time to adjust and recover.  

Start the Conversation 

If you haven’t started planning your retirement, now’s the time! Don’t postpone any longer, use this opportunity as a wake-up call and get in contact with a financial advisor. The sooner you start contributing to your retirement portfolio the more money you will accumulate in the long run. Professionals advise that saving for retirement becomes increasinglymore difficult as time goes by. As people grow older, they typically start families, buy houses, drive nicer cars, and purchase other amenities to improve their lifestyles. The drawback is that all these additional payments make allocating money toward a retirement plan significantly more difficult. 

If you have a company-sponsored retirement plan (e.g. 401(k), SEP/Simple IRA, etc.) and haven’t done so already, speak with your employer about the benefits available through your current retirement plan. Inquire with your employer about the ability to take a participant loan or in-service withdrawal from your retirement plan if necessary. 

If you sponsor a retirement plan at your company and need to know the latest updates and recommendations based on your changing priorities and needs – we are here for you! 

For more information on remaining ahead of the curve and preserving your financial health, check out ourblog

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For tips and information regarding retirement plans, contact us.


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