If you turned on the news this morning, there was plenty to worry about.
Renewed conflict involving the United States and Iran sent oil prices sharply higher, with Brent crude moving above $90 a barrel. Stock futures moved lower as investors considered what another period of geopolitical uncertainty could mean for inflation and the economy.
At the same time, the Federal Reserve is still fighting inflation. Fed Chairman Kevin Warsh said Friday that the Fed’s preferred inflation measure was running at 3.7%, well above its 2% target. His comments also caused markets to reconsider whether interest rates could move higher again.
Then there is how Americans actually feel.
Consumer confidence fell again in August, reaching its lowest level in seven months. People have become more concerned about future business conditions, employment and inflation.
Put all of that together and I think there is an important retirement planning lesson:
Your retirement strategy cannot be built around the assumption that the world will remain calm.
Retirement Doesn’t Happen in a Perfect Economy
I’ve worked with people through enough different markets to know that there will always be another headline.
A war.
A recession.
An election.
Inflation.
A market correction.
An interest-rate change.
A banking problem.
Something we didn’t expect.
The specific event changes, but uncertainty never completely disappears.
That’s why I don’t believe retirement planning should be about predicting exactly what happens next.
It should be about preparing for several possibilities.
What If Higher Oil Prices Keep Inflation Elevated?
This week’s jump in oil is a good example.
Higher energy prices don’t only affect what you pay at the gas pump. Energy costs can eventually work their way through transportation, manufacturing, food and other areas of the economy.
For someone who is already retired, that matters because your paycheck may have stopped increasing while your expenses haven’t.
The Federal Reserve is already dealing with inflation above its target, which makes additional price pressure especially important to watch.
This is why retirement income planning needs to consider purchasing power.
Having $6,000 of monthly retirement income today is one thing.
What will that $6,000 buy ten or fifteen years from now?
That’s a different question.
What If Interest Rates Stay Higher?
Higher interest rates create another interesting situation.
They can create opportunities for retirees seeking income, but they can also affect bonds, stocks, borrowing costs and the broader economy.
The federal funds target range currently stands at 3.50%–3.75%, and markets are now paying close attention to whether the Fed could raise rates again.
For retirement planning, I wouldn’t look at that as simply good or bad.
I’d ask:
How can today’s interest-rate environment be used within the overall retirement strategy?
That’s a much more productive question.
Your Retirement Shouldn’t Depend on One Outcome
This is where diversification means more to me than simply owning several investments.
I also want diversification of purpose.
Some money may need to provide growth.
Some may need to create dependable income.
Some should remain liquid.
Some may be positioned for future tax planning.
Some may help address healthcare or long-term expenses.
And some may eventually become part of the legacy you leave your family.
When every dollar has a job, you aren’t depending on one investment—or one economic outcome—to make retirement work.
The Biggest Risk May Be Reacting to Every Headline
Weeks like this can make people feel as though they should do something.
Sell.
Move to cash.
Buy something.
Change the entire portfolio.
But financial decisions made because of fear can sometimes create bigger problems than the event that caused the fear.
I’d rather have a strategy that already answers:
Where does my income come from if markets decline?
How much money do I need accessible?
Which assets are designed for longer-term growth?
What happens if inflation stays elevated?
How much investment risk do I actually need to take?
When those decisions have already been considered, today’s headline doesn’t necessarily require tomorrow’s portfolio change.
Build a Retirement Plan for the World We Actually Live In
There will never be a headline that says:
“Everything is now certain. It is officially the perfect time to retire.”
That day isn’t coming.
The world will continue changing.
Markets will continue moving.
Presidents will change.
Interest rates will change.
Taxes will change.
And unexpected events will happen.
A good retirement plan shouldn’t require all of those things to cooperate.
It should be designed knowing that they won’t.
At Summit Wealth Consulting, we help individuals and families coordinate retirement income, investments, tax strategies, protection and legacy planning so that their financial future isn’t dependent on predicting the next headline.
Because financial confidence doesn’t come from knowing exactly what happens next.
It comes from knowing you have a plan for when things don’t go as expected.
Schedule a Consultation SWC Website Contact Us
This material is provided for educational purposes only and is not intended as individualized investment, tax or legal advice. Investment strategies involve risk and should be evaluated based on your individual circumstances.