In a survey, the Global Atlantic Financial Group found that, “The survey of retirement age investors ages 59 to 75 with more than $250,000 in investable assets found more than seven out of ten (71%) believe rising inflation will negatively impact their retirement savings.” This indicates that even those with investable assets and savings are becoming cautious and wary of retirement as a result of inflation. This should come as no surprise, as increasing concern over rising inflation has dominated the media in recent months. But, how does inflation affect retirement planning, and what do consumers need to know right now?
How Inflation can Affect Retirement Planning
Many people put money away for retirement when they can. This could be on a monthly or annual basis. Unfortunately, inflation can have a negative impact on the value of existing retirement savings. For some, storing retirement savings in a separate savings account is the most convenient and accessible option. However, this allows little room for growth, and the minimal growth may not be enough to counteract inflation. In this case, it may be advisable for those saving for retirement to seek better alternatives, like investment. Other alternatives may offer greater growth, but they do come with their own set of risks.
Purchasing Power and the Cost of Living
Rising inflation has two certain implications: less can be bought for the same amount, and the cost of living will increase. Businesses frequently respond to inflation by increasing their prices. This is an annual event, however, in times where inflation is extraordinarily high, prices can surge. This ultimately means that consumers can purchase less for an amount that they would normally spend for more. In addition to this, the average cost for living increases. This affects consumers across multiple markets, from food to entertainment. In the case of retirement planning, people may have to increase their goal amount, as the cost for the items and services they will need in retirement will have increased exponentially. This can be worrying, as consumers have to adjust to current inflation whilst preparing for the future.
The Rental Market
At first glance, it may appear that high inflation is a good thing for the housing market. It usually means that it is no longer a buyers market, and consumers are more likely to rent due to the high cost of mortgages. As a result, many people, who have the means, invest in property as a form of retirement planning. The property is in turn expected to equate to a form of passive income. This income often supplements a mortgage. However, in times of inflation, mortgages are higher, and may take longer to pay off, or require higher installments. This can be costly, and the value of the investment in the long run may not be satisfactory. This is coupled with the fact that the US is experiencing a declining birth rate, and is beginning to show signs of an aging population. The declining birth rate may mean, in the long run, that the rental market will take a hit.
The Necessity for Retirement Planning
Rising inflation and increased uncertainty for consumers has necessitated swift action towards retirement planning. Consumers can no longer expect for savings to amount to a satisfactory retirement plan. As a result, it is often exceedingly beneficial for consumers to seek help and financial advice for retirement planning.
- Robert Cannon (MBA) is the Managing Partner and Investment Advisor Representative for Canon Wealth Solutions. Cannon has over three decades of experience in the industry, and is an expert in guiding clients to a successful retirement plan. Cannon, and Cannon Wealth Solutions, ensures that every client receives a wealth of advice from multiple experts on investment, wealth management, and wealth building. According to Cannon, “The first step to devising an accurate and efficient retirement plan, is understanding the lifestyle that you want to live in the future. This will dictate the necessary steps for wealth building.”
Cannon Wealth Solutions takes the time to understand each client’s needs with regards to their retirement plan. Each client has their own set of necessities, and these necessities vary. Despite this, there are some consistent necessities that every client will need in their retirement. This includes savings for basic needs, adequate medical coverage, and various forms of insurance. Seeking the help of financial experts that specialize in retirement planning allows consumers to orchestrate a financial plan that encompasses basic needs, and wants beyond that. Moreover, experts in retirement planning have the experience and knowledge that allows them to make the most informed decisions when it comes to retirement plans. Not every consumer knows how, where, or when to store or invest their savings. Cannon Wealth Solutions ensures that every client is able to make the best decisions for their financial well being.
Inflation, especially when it is high, can have a knock on effect for financial planning. This is especially true for retirement planning. Consumers need to become aware of the implications of rising inflation, and need to assess their current financial plans. A good way to do this is to enlist in the help of a financial advisor, with a specific specialization in retirement planning.