One of the most challenging aspects of planning for your retirement is trying to predict and beat inflation in the future. When you first start your retirement savings journey, you probably set the account up for the current market situation, but the one thing you can count on in investing is change. Times of change require a close examination to ensure that your retirement account is still a good fit for beating inflation.
Being Able to Beat Inflation Should Be a Given
If you are an investor who likes to play it safe and thinks that your savings account is the best place for your money when volatility in the market threatens, then you might need to rethink your strategy. In the current inflationary period, inflation is at 5.4%, which is up from 1% only one year ago. By comparison, the best CD rates are at around 0.32% for a five-year Jumbo CD. That means that if savings account or CDs are your preferred investment strategy for building retirement, right now, you are losing money quickly.
For those who are in a situation where they are watching their retirement savings dwindle as the cost of goods rises, it is time to do a financial checkup on your portfolio. Regardless of whether you choose to listen to the doomsayers or the optimists about what inflationary rates hold for the future, it is time to get your portfolio in shape sooner rather than later.
Throughout the past century, we have seen historical inflation rates as high as 13% and as low as negative numbers. The current inflationary index is somewhere in the middle, but as an investor, you need to make sure that you are ready for anything that comes in the near or distant future.
Where Should Your Money Be?
For the investor who is averse to risk and likes to play it safe, times like these can cause sleepless nights. The good news is that they do not have to, and if you make a few key moves, you can come out ahead. So, what should you do?
As prices rise in certain sectors, they create excellent opportunities for investing in stocks or mutual funds that specialize in those commodities. The first place to look for good investment ideas in this economy is at your grocery receipt and regular household bills. Have you noticed the rising prices at the pump? If you see this as an investor, you might see an opportunity that can take the sting out of the cost of a fill-up.
You might have noticed that your energy costs have gone up even though you consume the same or less. This is not your imagination, and the energy sector has gone up 23.8% over the last year. Are companies losing money? No, they are passing on their rising expenses to you. The energy sector has been a staple for investors during inflationary periods and historically does better than many others.
Many financial gurus will tell you that the first thing you should do is pull your money out and put it in gold, silver, and other precious metals. This belief in the stability of precious metals is a common myth, and you need to know that there have been several times in the past decade when gold lost money against inflation. The adage about gold as a safe bet in inflationary times holds most of the time, but not always.
Where should you invest to ride out this inflationary period? Of course, essential commodities like oil, energy, and medical care are always a good bet. In addition, many advise investors to place their money in TIPS and REITS that have typically fared well during similar times in the past. The best thing you can do to survive these times is to do a financial checkup and ensure that your portfolio is in top shape.