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Build an Inflation Hedge Around Retirement

April 10, 2022

From the Kiplinger website

That retirement scourge from another era is back. Soaring inflation, once a fixture of the 1970s and ’80s, returned with a vengeance in 2021, when prices skyrocketed 7% for the year, the highest in four decades. For retirees, inflation brings two headaches: stretching a fixed income to meet rapidly rising prices and investing a retirement savings portfolio so that it keeps pace with the higher cost of living. “The biggest fear for retirees is running out of money,” says Chris Miller, founder of the RIA South Pointe Advisors in New York City. “High inflation reduces their purchasing power and increases the likelihood that their portfolio cannot support their spending needs.”

Supply chain disruptions, a worker shortage, pentup consumer demand and government monetary policy have all conspired to keep the economy running hot, with high prices the result. Whether today’s inflation is a temporary glitch or a multiyear spike is still unclear. The Federal Reserve expects inflation will subside and range somewhere between 2.5% and 3% by the end of 2022. That’s still higher than the 1% to 2% annual rate from the past decade, and the Fed could also be wrong. If inflation is here to stay, retirees need to prepare for it.

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