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Inflation, Recession, and Retirement

AngelaRoberts

Written by Angela Roberts

Sep 15, 2022

There are a lot of unknowns in this world, but they shouldn’t frighten us into inaction. As of this writing, we’re still waiting on a potential declaration of whether or not we are in a recession while the Federal Reserve continues to fight high inflation.

Back in July 2022, Alliance for Lifetime Income and CANNEX jointly released their “Protected Retirement Income and Planning Study.” The study found that “nearly 80% of financial professionals have changed their approach to retirement planning this year” and that “most Americans ages 45 to 75 are worried about the dual risks of high inflation reducing spending power in retirement (81%).”

But how much reason is there to worry, and what can you do about it?

Inflation and market volatility are already impacting Americans’ ability to retire.

Elderly couple looking at receipts and calculator

I’ve always been a planner. I take comfort from making sure that I’m as prepared as possible for whatever the future may hold. And right now, it seems like the future for many Americans may include a little more time working before being able to secure a comfortable retirement.

On September 13, 2022, Bloomberg wrote that this year is “shaping up globally to be ‘one of the worst years to retire in recent memory.’” This is according to the latest Natixis Investment Managers annual Global Retirement Index, which shows that the United States has dropped one spot, to number 18, on its top 20 list of “Leaders in Retirement Security.”

“It’s becoming more difficult to retire almost anywhere, as high inflation, volatility in financial markets, rising interest rates, and aging populations add to financial stress on pension plans and government benefits,” said Bloomberg.

In addition, the article points to government debt, tax pressure, and income inequality as contributing to America’s drop in relative retirement security.

But while these factors may impact Americans’ ability to retire in 2022, that doesn’t mean retiring—even retiring comfortably—is out of reach.

Despite continued volatility, analysts say some Americans can still retire comfortably.

Silver bull and bear on top of market charts showing volatility

Another thing I’ve always believed in is the idea that proper research and hard work always pay off. So when CNBC reported on September 13, 2022, that “stocks fell sharply on Tuesday after a key August inflation report came in hotter than expected,” I began looking for opportunities to add additional protection to my portfolio. And according to a group of analysts interviewed by Barron’s, finding the right level of diversification may be key for those looking to retire sooner rather than later.

In an article titled “Should you Postpone Retirement? What Advisors Say,” seven different financial advisors give their thoughts on the current economic climate and what it means for retirement.

Broadly, the advisors state that the decision of whether to retire as planned or wait longer depends on an individual’s asset level and financial plan. Some discuss slight changes to spending habits, but none of them say that retirement will necessarily be outside the realm of possibility solely because of current economic factors like high inflation.

One quote really caught my attention: Emlen Miles-Mattingly, CEO and founder of Gen Next Wealth, says this: “You can make adjustments to the plan, but you can’t do that for the plan that doesn’t exist.” I really appreciate this thought because it speaks to the importance of taking action now to ensure that your retirement portfolio is protected when it matters most.

A well-diversified portfolio can be key to protecting yourself in a recession.

Another point brought up in the Barron’s article is the importance of multiple sources of income during retirement—not having to rely on, for example, just Social Security to get by. This is another point that hits home for me, as it echoes something I’ve been saying for years: Diversification may be your best weapon against the negative effects of economic factors like inflation or recession.

By allocating portions of your wealth into a variety of assets and asset classes, you add extra levels of protection to your retirement portfolio as well as a variety of potential sources of profit or income. For example, a piece of property can be held as an asset and sold at a later date or potentially be rented as a source of income.

You may also wish to look into options like a precious metals IRA, which combines the benefits of individual retirement accounts and precious metals ownership and provides you with yet another option for managing and building your retirement portfolio.

Make no mistake—when the economy struggles, it affects us all. But with careful planning and a proactive mindset, you can help lessen the potential impact of a recession on your retirement portfolio.

To learn more about the benefits of precious metals IRA, CLICK HERE to request a FREE copy of our Gold IRA Information Kit.

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