“We haven’t invested all of Mom’s money in this product,” Ms. Cheng said. “We only invested a portion of her IRA and her inherited IRA. We did this to reduce market risk, inflation risk and longevity. ” (These additional contracts are often expensive, and the additional features add to the cost of the annuity contract. The living support recipient added 1.35% to the contract value for Ms. Cheng’s mother.)
Save and invest. You know that, but it’s worth repeating. Another reliable way to boost your retirement savings is by investing in low-cost, diversified mutual funds, no commission. Use a cost analyzer to see how much you can save.
“Take away as much as possible” in the combination of 401 (k) s, Roth IRA and HSA, said Ms Brown-Bostic. Make sure your retirement portfolio is diversified and protected with inflation-protected securities (known as TIPS), short-term bonds, floating rate securities, and US and international stocks. And if you already have such a portfolio, track your progress annually.
“These are not one-off items,” said Ms Brown-Bostic.
And remember: life is throwing balls
With inflation, appearances can be deceiving because short-term single-digit gains don’t seem to be so dramatic. Although consumer prices fell during the first wave of the pandemic, they rose when the business reopened this year, widespread supply chain problems arose and many people returned to work.
Excluding volatile food and energy prices, the CPI rose 4.6 percent in October from a year earlier, the highest growth since 1990. By comparison, it averaged about 3 percent between 1913 and 2020, with a notable jump in the 1970s (7.25 percent on average) and 1980s (5.82 percent).
Regardless of how you view inflation, you will need to overcome the cost of living and unforeseen financial shocks before retirement, such as job loss, divorce and out-of-pocket medical expenses, which certainly make planning for retirement even more difficult. … A study by the National Endowment for Financial Education found that 96 percent of Americans experienced four or more of these “income shocks” by the time they reached the age of 70.
How to avoid the triple threat of inflation, surges in income and not outlive your nest? To get started, Ms. Johnson says you need to work with a certified financial planner working only with fiduciary commissions who can diversify your retirement portfolio with low-cost index funds. Such a planner will charge you a flat fee or an hourly rate depending on how much work you need. Do not work with financial advisors, brokers, or agents that charge commissions.
Every step has been shown to give a sense of empowerment. “When you’re young, start planning,” said Eileen Cheng. “You can take out a loan for anything but a pension.”