Helpful miscellaneous articles
regarding our retirement plan and planning.
Like you, I review my retirement nestegg and plan from time to
time. Recently, I went though some
continued education for some credentials I maintain and it occurred to me that
we all could use a review about these issues.
So with your help, we will share and post articles and info that may be
helpful and of interest to many of you in this section.
4
ways to protect your retirement fund from historically high inflation
Sam Swenson, CFA,
CPA
The Motley Fool
In a summer marked by
economic uncertainty, those on the brink of retirement are feeling most of the heat. Inflation
data -– most recently registering at 9.1% – are staggering. Combine this
reality with overseas conflict and rising interest rates, and you have a
big-picture scenario that doesn't bode well for aspiring retirees.
While there isn't much the
average pre-retiree or retiree can do to change monetary policy, there are
things they can do to make things easier to handle in retirement. Looking into
I-bonds, delaying Social Security, working in retirement and recommitting
to global diversification are a few of these strategies.
Here, we'll go through four
ways to safeguard your retirement amid unusually high inflation.
1. Add I-bonds to the mix
Series I savings bonds, offered electronically through
the United States government, are currently paying interest at an annual rate
of 9.62%. These bonds represent loans to the U.S. government with an interest
rate indexed to current inflation levels. If you choose to buy, you'll need to
own for at least a year, and you'll be subject to a maximum purchase limit of
$10,000.
There are ways to get
creative around I-bonds, even if $10,000 isn't a meaningful share of your
investment portfolio. For instance, the $10,000 limit applies per person, which
means, if you're married, your spouse can also purchase I-bonds. Or, if you
happen to have created a revocable trust, the trust is also considered a person
in this context and can purchase bonds.
I don't
plan to retire:Do I still need a retirement
account? Yes, and here's why.
Near
retirement:Here's how to clean up your
investment portfolio.
2. Delay filing for Social
Security
Social Security is one of the few ways to
access inflation-adjusted income without having to do anything except wait. By
waiting until full retirement age ("FRA") to claim benefits, you'll
get a lifetime annuity proportional to the amount of payroll tax you've
contributed to the system over your working career.
For every year you delay
your claim beyond FRA, you'll receive a per-year bump of 8% in addition to any
cost-of-living-related adjustments along the way, up until the age of 70. In
other words, by delaying your benefit claim, you'll receive significantly more
than your proportional share of benefits, and you'll receive them with inflation
protection for the rest of your life.
3. Continue working
This is health-dependent
and perhaps easier said than done, but working up to and through your early
retirement years can ease the stress on your finances. Even part-time work,
through which you earn $10,000 or $20,000, can go a very long way in protecting
your nest egg. Reducing the need to withdraw from your portfolio is absolutely
essential in the face of economic headwinds.
The non-financial aspects
of working also matter a great deal in this context. If you have an undesirable
work environment or long commute, continuing on may seem too difficult to bear.
But if you're able to find work that you either find meaningful or easily
tolerable (remote work can fit the bill here), it can make sense on many levels
to keep some sort of active income.
Keeping engaged is
undoubtedly a key to overall retirement success, and working can be a big part
of that -- both financially and non-financially.
4. Recommit to
diversification
Given the protracted bull
market of the 2010s, many people simply stuck to full-stock portfolios. In
retrospect, stockholders did far better than bondholders over the most
recent bull run, with equity returns consistently competitive
and interest rates at generational lows. The next decade may look quite
different, which means the need for portfolio diversification should be
top-of-mind.
Globally diversified
portfolios consisting of stocks, bonds and real estate are well-positioned
to combat most economic environments; the key is to not overcommit to any one
asset class. Amidst economic turmoil, spreading your eggs around to different
baskets is simply a necessity of intelligent investing.
Control the variables you
can control
In general, remember that
you can only control what you can control, and let the process play out as it
will. Sticking to a laid-out methodology when it comes to managing your
investments is critical in that effort.
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Fool is a USA TODAY content partner offering financial news, analysis and
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(As with any of these informative articles,
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