A jump in inflation, a volatile stock market and low interest rates are a combustible mix to blow up even the most carefully constructed retirement portfolios.
In our ongoing VIP series, we asked Jamie Hopkins to give us his thoughts on these matters, as well as if Congress will fix Social Security.
Hopkins is a lawyer, certified financial planner, and managing partner of wealth solutions at Carson Group. He is also a retirement income planning expert and the author of "Rewirement: Rewiring the Way You Think About Retirement!"
We asked him our series of questions on today's events and how that could affect retirees and portfolio planning going forward.
1. Inflation has jumped 7.9% over the last 12 months. How would you counsel advisors to prepare clients for either pre- or post-retirement portfolios with this threat? What are the best options now?
Inflation today represents a big challenge with low interest rates. Staying in the market can be a good way to combat inflation overall, but if interest rates rise, one risk is that market returns often suffer when interest rates are moving up.
Another option is to look at companies that can raise prices during periods of higher inflation. Look at TIPS and I-Bonds today — as both provide some inflation protections.
I would also encourage most people to take a measured approach and not overreact and try to predict the future. The markets can outlast you. It's important to remember that.
2. The Social Security COLA, which was raised to 5.9% this year, is lagging current inflation rates. What is the best way for advisors to help retirees to counteract the crunch they are taking to their Social Security benefits (especially if they already are collecting benefits)?
