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How Will Inflation Affect Your Retirement?

February 04, 2022

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 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 December 27th, 2021 to January 26th, 2022, the Nasdaq dropped over 2,500 points.  

While as of now it is not as worrisome as the severe degradation caused by the emergence of the Covid-19 pandemic, its effects have caused the worst January performance of the Nasdaq since the 2008 financial crisis. 

The reason behind this sudden drop is due to the FEDs suggestion that it will take aggressive action to slow the rising cost of consumer goods. During the pandemic, stimulus packages, low interest rates, and low employment rates hiked the price of many of the goods the average American relies on. Taking action against inflation, while a net benefit, could cause more severe consequences for the short-term economy. 

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 lifestyle. The drawback is that all these additional payments make allocating money towards 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! On ourCOVID-19: Frequently Asked Questions Page, you can look forward to updates from us on changing government policies that result in relief for company-sponsored retirement plans, helpful tips, and resources for navigating your plan during these uncertain times. 

For more information on how to remain ahead of the curve and preserve your financial health, check out ourblog

For more tips and information regarding retirement plans,contact us

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