Joe Lucey

Inflation appears to be moving up in some developed countries. In the U.S., inflation is measured by the consumer price index, which tracks the prices of about 80,000 items each month. 

This includes our most common household groceries such as cereal, milk, coffee and wine.

In Great Britain, economists have a similar measure called the retail prices index. Due largely to a rising number of small distilleries in the past few years, the Brits recently added gin to its monitored shopping basket.

After years of consistently higher sales, gin has joined the ranks of other British staples in tracking higher prices, thereby earning the moniker “ginflation.”

There are a lot of positives in economic growth, but one downside is the inflation that sometimes comes with it. An increase in the GDP rate, consumer prices and, inevitably, interest rates often follow as well.

In recent months, we’ve seen a jump in gas rates; home prices are rising at the quickest pace in nearly 10 years; and the rising cost of medical care — which had slowed down until this year — is back on the ascent. While today’s global markets and automation technology help keep price increases down on most consumer goods, inflation can still impact the long-term purchasing power of a conservative retirement portfolio.

That’s why some investors incorporate securities touted as “inflation busters” because they can provide ongoing income growth but are still considered low-risk instruments. Inflation-busting portfolio options could include:

• Treasury inflation-protected securities (TIPS) — Government-issued bonds that adjust principal value each month to align with inflation (or deflation).

• Floating-rate fund — This type of fund typically invests in variable rate bank loans issued to companies with substandard credit ratings. Because the interest rate adjusts according to a short-term benchmark, they offer ongoing income opportunity.

• Stocks as an asset class have historically outpaced the rate of inflation in the long haul. Yet some sectors weather an inflationary environment better than others. For example, the energy, industrials and materials sectors generally outperform more interest rate-sensitive sectors such as utilities and telecommunications during periods of rising inflation.

• Real estate has long been recognized as an inflation hedge, but some retirees don’t want to get into the business of being a landlord. One way to potentially reap the gains of real estate income without a direct investment is to explore the benefits and risks of a real estate investment trust (REIT), REIT mutual fund or REIT ETF.

The content provided here is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal or tax advice.  Contact us at info@securedretirements.com or call us at (952) 460­-3260 to schedule a time to discuss your financial situation and the potential role of investments in your financial strategy.

Financial advisors used to refer to retirement income as a “three-legged stool.” This meant that the stool was supported by:

• (1) Social Security benefits,
• (2) an employer pension plan or other employer-sponsored plan and
• (3) personal savings/investments. Today, retirement income is less reliable because fewer employers offer pensions, and employees have not been able to save as much due to stagnant wages and high levels of debt.

One approach to building a retirement income strategy today is to visualize it as a “four-legged stool.” This is comprised of the three components mentioned above, plus a guaranteed income annuity. To create that fourth leg, an individual may need to reposition a portion of funds from other retirement accounts. However, while the retirement stool may be shorter than in years’ past, that fourth leg can help offer a bit more stability and confidence in your retirement income plan.

 

The content provided here is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal or tax advice.  Contact us at info@securedretirements.com or call us at (952) 460­-3260 to schedule a time to discuss your financial situation and the potential role of investments in your financial strategy.

Building up a retirement nest egg is one thing, but making it last throughout your lifetime is quite another. With a larger share of the financial responsibility for retirement shifting from employers to employees, it’s more important than ever to explore all income strategies to help determine what is most appropriate for your situation.

One thing to consider is your Social Security benefit strategy. For many, the spousal benefit is based on the primary earner’s level of income. While you might be tempted to start taking benefits as soon as possible, there may be good reasons to delay. First, the longer you wait (up until age 70, when increases cease), the higher your payout for life. Perhaps more importantly, waiting to take benefits could leave a higher benefit for your spouse should you pass away.

Remember, if you take a lower benefit early, your surviving spouse may receive that reduced amount for the rest of his or her life. A surviving spouse receives the higher benefit, whether it’s their own or their spouse’s, but the household will no longer receive both. Since Social Security represents the only guaranteed income stream for many of today’s retirees, it’s a good idea to consider ways to delay starting the benefits in order to potentially increase that income stream.

In addition to a Social Security strategy for lifetime income, the following are other financial vehicles typically used to provide long-term income and/or growth opportunity in a well-diversified financial strategy.

Bonds — While traditional bonds can provide a reliable stream of income, they come with a maturity date. At that point, an investor must decide where to reinvest the principal. One strategy is to hold a selection of bonds with varying maturity dates. Investors can also take advantage of the inherent diversification provided by bond funds by letting a professional money manager make ongoing decisions about where to reinvest assets from maturing bonds.

Dividend-Paying Stocks — Stocks with a strong history of paying dividends also offer a source of ongoing income. Here, too, investors may prefer to buy a dividend income fund to take advantage of a fund manager’s buy and sell experience. It is important for investors to understand that dividends are paid at the discretion of the board of directors and are therefore not guaranteed.

Annuities — There is a wide range of annuity options that can be tailored to a retiree’s specific needs. Many offer a fixed level of income for a specific time period or for life and can be customized with optional benefits, such as income riders that increase income payments commensurate with inflation. Please note that optional riders may not be available on all products and may have an additional cost. Fixed index annuities offer individuals the potential for interest credits based on positive changes of an external index without actual participation in the market, while still receiving certain guaranteed protections backed by the financial strength and claims-paying ability of the issuing insurance company. The amount of interest you receive from a fixed index annuity can vary, and there is a limit on how much interest you could earn.

 

The content provided here is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal or tax advice.  Contact us at info@securedretirements.com or call us at (952) 460­-3260 to schedule a time to discuss your financial situation and the potential role of investments in your financial strategy.