Soaring inflation has forced many Americans to change their spending habits, but it also has them rethinking retirement plans. A recent survey finds 79% of Americans age 45 to 75 are worried about inflation impacting their retirement. And those concerns extend to professionals, as well. The same survey found 80% of financial pros have changed their approach to retirement planning this year, due to concerns about the economy.
If you or your financial planner are among those fretting about inflation and retirement, allow KTRH Money Man Pat Shinn to put you at ease. "I can see where somebody who has been in financial planning for a shorter time might make a knee-jerk reaction," he tells KTRH. "But as somebody who has done this for a very long time, I can tell you I have not made any adjustments on my long-term inflation assumptions."
Shinn explains that retirement planning is about the big picture and looking at long-term projections, not short-term headlines. "Yes, we know inflation has been sky-high, the highest it's been in some 40 years, but it is a very, very different type of inflation than what we saw back then," he says.
Rather than focus on a one or two-year spike, he recommends looking at the average over many years. "Right now, the market is pricing in that over the next ten years, inflation will average two-and-a-half percent," says Shinn. "That's right in the range of what it's traditionally been longer-term."
"So while inflation is high now, there is a very big argument that it is going to come back down to its long-term trend," he continues. "Thus, I see no need to make any change on inflation assumptions, as far as retirement planning is concerned."
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