Not only is inflation hammering pocketbooks, but the stock market is also hammering saving and investment accounts.
The current market downturn is the largest since the start of the pandemic, and before that it was 2008, and it is not only affecting how people manage their money now, but into the future as they reconsider retirement.
“I’ve got two clients right now that are saying I’m not so sure I want to retire in this environment,” said Peter Tedstrom, a regional director for Merit Financial Advisors. “You’ve got a war in Ukraine which is exacerbating oil prices. We’ve got inflation that is higher than we’ve seen in the last 40 years, and we might be heading into a recession. So those are three things that are causing investors to say what am I going to do? Well, at least I can work and not touch the portfolio for a period of time.”
According to the BMO Real Financial Progress Index, which conducts a quarterly survey to better understand the state of the economy, 25% of Americans say they are delaying retirement because of inflation. More than 60% of those ages 18 to 34 said they had to pull back savings contributions to make up for rising costs of necessities.
“So, a really good retirement plan is flexible and adaptable,” said Lynn Dunston, a partner at the wealth management firm Moneta.
Dunston says a good tip anyone should consider, even those not working with a financial advisor, is to keep some cash aside so it is not exposed to market volatility. The report from BMO showed this is happening more as more people are making yearly budgets and planning for the future, even if it is at a slower rate.
The BMO Real Financial Progress Index report states 36% of respondents have reduced their savings and 21% are putting away less for retirement in order to keep up with growing costs caused by inflation.