Next Avenue: “Money Advice for Retirees on Fixed Incomes When Inflation Is Soaring”

Next Avenue, December 3, 2021 — Marguerita Cheng, CFP® Pro is featured in today’s article by Kerry Hannon who writes: “Inflation rocketed by 6.2% in the 12 months through October 2021, the fastest pace since 1990, and retirees on fixed incomes are feeling the painful pinch. They’re seeing prices soaring for everything from rent to gasoline to Medicare prescription drug premiums, and low rates on bank savings accounts aren’t helping.”

For insight, Kerry interviewed three financial planners.

Here’s what Rita said: 

“The first thing is do your budget. Look at how much you have coming in and your predictable expenses. You will need a liquidity basket to pay those regular bills. That will be a mix of cash and maybe funds held in an online savings account, money market account or shorter-term CDs, if that’s appropriate.

“Make sure that you have money for the here and now and the liquidity access to pay your bills.

“One of the best ways which we can combat inflation is with stocks or stock mutual funds. The stock market’s average annual gain outpaces inflation over the long run, but you don’t want to put all your money there. The amount of money you should have in stocks, bonds and cash is a function of your time horizon, your risk tolerance and your cash flow need for expenses.

“For many people, the easiest way to stay invested is through a target-date fund. You can pick a fund with a year, such as 2027, in its name. The fund manager then divides up investor’s cash among stocks and bonds, shifting that allocation to a more conservative mix as the target date approaches or soon after.”