In our opinion, many people are noticing the effects of rising inflation, even when it doesn’t make dramatic headlines. Sometimes, it shows up at the grocery store, after a car repair, or when it comes time to renew your insurance. Those increases can quietly reduce what your retirement savings and investment income are actually able to buy.
In our opinion, for many investors and retirees in Springfield, protecting purchasing power can be just as important as growing wealth. While no strategy can eliminate inflation risk entirely, there are several approaches that may help strengthen your long-term financial plan. These four tips offer a starting point for discussing this situation with your financial advisor.
- Build a Portfolio Designed to Keep Pace With Inflation
Cash is great, but too much idle cash may gradually lose purchasing power when prices continue to rise. Depending on your goals, a diversified portfolio may include investments that have historically shown the potential to outpace inflation over longer periods. Equities, Real Estate Investment Trusts (REITs), and certain inflation-linked government securities may fit well within your overall investment strategy.
An appropriate mix for you depends on factors such as your time horizon, income needs, and comfort with market fluctuations. Rather than reacting to every economic headline, many investors may benefit from maintaining a disciplined, diversified approach.
- Put Short-Term Cash to Work
In our opinion, maintaining an emergency fund is important, but keeping more cash than you need in low-interest accounts may reduce your purchasing power over time as inflation rises. It may be worthwhile to periodically review where your short-term savings are being held. Depending on current interest rate conditions, options such as high-yield savings accounts, money market funds, or certificates of deposit (CDs) may provide opportunities to earn more on funds that are intended for near-term needs. Your advisor can help determine how much liquidity makes sense while balancing longer-term investment objectives.
- Review Debt as Interest Rates Change
Not all debt carries the same long-term impact, so for some households, maintaining fixed-rate borrowing may provide greater predictability if interest rates remain elevated or continue changing. At the same time, reviewing higher-cost variable-rate debt could become an important part of an overall financial strategy. An approach depends on your broader financial picture, so consider evaluating major borrowing decisions alongside your investment and retirement plans rather than in isolation.
- Think Beyond Investments
If you want to protect your purchasing power, know that your ability to generate income can also influence your long-term financial security. For those still working, pursuing additional education, certifications, promotions, or new career opportunities could strengthen future earning potential. Even relatively modest income increases, when saved and invested consistently, can have a meaningful long-term impact.
It’s Time to Build an Inflation Strategy That Fits Your Goals
Inflation affects everyone differently. Your income sources, retirement timeline, tax situation, and investment mix all influence which strategies may be appropriate for your circumstances.
The advisors at LaTour Asset Management of Springfield can help you evaluate ways to help strengthen long-term purchasing power while keeping your broader financial goals in focus. If you’re wondering how inflation may affect your retirement or investment strategy, contact our Springfield office at (877) 888-5724 and start crafting an inflation strategy that works for you.
