Hot off the press!
Kiplinger.com just published a new article I wrote that addresses the significance of increased U.S. inflation and the impact it may have on your retirement planning.
We've all heard regular and repeated news stories regarding the threat of higher inflation as a result of pandemic and supply-chain-related issues (and now the war in Ukraine). We think it's time the financial planning profession addressed this situation as well as what we may want to do going forward relative to projections and how a sustained higher level of inflation may impact individual goal scenarios.
The past twenty years or so have provided benign inflation projections of around 2.4%, which is a common input in financial planning software. What if the current economic environment creates the need for higher inflation assumptions, such as the longer-term average of 3.3%? Will these assumptions adversely impact your future goals and regular cost of living? What's the best answer to retain the purchasing power of your dollars?
Fortunately, we have solutions, and our various software tools allow us to quickly model how much of an impact higher inflation may have on your planning. In many cases, there will probably not be reason for concern, in others, discussions regarding trade-offs may be necessary.
The challenge we face is somewhat similar to the interest rate dilemma. Since the 90s, interest rates have steadily declined to a point where they could really not go much lower. Now we are seeing an increase in interest rates to more normal levels. This is not necessarily a bad thing, as safer investments may get to the point where we can actually see real returns that are meaningful. Inflation is another matter, however, as relatively small increases can adversely impact purchasing power in the future, and impair overall confidence percentages.
The primary point of this is that we want to be aware of systemic economic changes and monitor them for longer-term trends. While no drastic action may be called for at this time, we need to remain vigilant and at least open to the idea that adjustments may be necessary in the next few years.
You can read the entire article here: "Will Inflation Derail Your Retirement Plan?"
If you have any questions, or if you would like to review your individual plan, pleas reach out to us to schedule a discussion.
---Doug Kinsey
Schedule a discussion with us: https://go.oncehub.com/ArtifexFinancialGroup
