Last year, you may not have worried about market downturns or cost-of-living increases, but with market volatility and inflation threatening retirement plans this year, plus continued rate hikes from the Fed, it’s important to make sure you know your options when it comes to protecting your wealth, earning income, and knowing the difference between both.
Keeping Up with Inflation
In short, income is the foundation of how we cover our costs of living. But when inflation causes prices to rise, the fixed income you may have been receiving or planned to receive in your retirement might not stretch as far as you thought. Unfortunately, you can’t stop inflation, but you can prepare by talking to your financial advisor to see how you can adjust your income streams.
A common strategy used by retirees to adjust their income to match inflation is incorporating I-bonds or Treasury Inflation-Protected Securities into their portfolios. These investment vehicles pay out interest distributions based on current Consumer Price Index data, which tracks inflation. For some, these can be a great way to maintain income on pace with inflation. Another investment vehicle to ask your financial advisor about is annuities. An annuity is an insurance-based financial product designed to provide you with guaranteed income and may even come with inflation-adjusted income payments.
However, income isn’t the only thing to be aware of when it comes to weathering inflation and market volatility.
Wealth Erodes from Inflation, Too
Protecting your wealth is a different challenge than earning income. If you’re looking to protect against inflation and taxation, transferring your investments into a vehicle that gives you taxable income may be counterproductive. There are better ways to store and protect your wealth without paying income tax on it.
If you’re more concerned with wealth protection than covering costs of living, consider talking to your financial advisor about including new asset classes into your portfolio. Although past performance doesn’t indicate future results, there are certain wealth-protecting strategies that have served retirees well during inflationary or volatile periods. Ask your advisor about asset classes that have seen stability or price increases during this inflationary and volatile market period.
But this conversation only scratches the surface. There are so many ways in which you can address these issues, and a fiduciary financial advisor will have professional advice for you that is tailored to your specific financial situation and goals. So, talk to your financial advisor today to get your assets one step closer to meeting your financial goals.
Securities and advisory services offered through Royal Alliance Associates, Inc. (RAA), member FINRA/ SIPC. RAA is separately owned and other entities and/or marketing names, products or services referenced here are independent of RAA. RAA is not affiliated with Lone Beacon
Neither the named representative nor the named Broker/Dealer or Investment Advisor gives tax or legal advice.
Fixed index annuities are designed to meet long-term needs for retirement income. Early withdrawals may result in loss of principal and credited interest due to surrender charges. Distributions may be subject to ordinary income tax and, if taken prior to age 59 ½, an additional 10% federal tax. An income rider or benefit (sometimes called Guaranteed Lifetime Withdrawal Benefits, or GLWB) is an additional feature available with some annuities and generally optional and come with additional cost. Income benefits are designed to provide income options above and beyond the standard annuitization or free withdrawal features in annuities. All contract gains beyond the CAP rate are surrendered to the insurance company to pay for the expense of the product.
The views expressed are not necessarily the opinion of Royal Alliance Associates Inc, and should not be construed directly or indirectly, as an offer to buy or sell any securities mentioned herein. Individual circumstances vary. Investing is subject to risks including loss of principal invested. No strategy can assure a profit against loss.