In retirement, offense is the best defense.

to retirement or looking to purchase a new home in retirement, consider the cash needed so your plans or timelines don't need to be altered in any way. For those who have way more cash on hand than they should, consider alternatives to savings, CDs, and checking accounts where they can try to maintain pace with inflation.

4. Protect Your Portfolio

As we saw earlier in 2020, recessions usually come with stock market downturns. Protecting your portfolio from losses, especially for those nearing retirement, is extremely important. With equity markets returning all-time highs, now is a great time to review your current allocation and risk tolerance. Many have had the same investment strategy for years without considering that they are now closer to retirement, or their portfolio no longer matches their needs and risk tolerance. With equity returns being strong over the past decade, it's easy to consider the return on investment as the primary bellwether for whether a change to the strategy is needed.

It's important to remember that for most, retirement requires a distribution strategy versus accumulation strategy in your working years. One's ability to recover from a downturn when you are no longer contributing and are now withdrawing is much more difficult than someone who is not. Many wait until things get worse in order to consider making necessary changes, but it's advisable to be proactive instead. In retirement, offense is the best defense.

3. Reduce Debt

Carrying large amounts of high interest debt or variable rate debt during a high inflationary environment can create great strain on a financial plan. As inflation increases, there is the potential for the Federal Reserve to increase interest rates in order to slow down demand and keep the economy from overheating. As people prepare for retirement, consider all existing debt and a plan on how to reduce or refinance that debt. Consider existing cash savings or monthly investment contributions to decide if that money is best utilized where it is currently being saved, or if paying down debt offers a better long-term return.

With interest rates at historic lows, review existing mortgage debt as well as the ability to consolidate debt for the possibility of reducing the interest rate or monthly payment amount. Another benefit of reducing debt is the ability to take advantage of potential discounts on items such as cars, recreational vehicles, or home improvements if inflation pressure slows or the economy enters a recession. Having a reduced debt load allows you the possibility of taking advantage of those opportunities when they arise.

5. Evaluate Income Needs and Distribution Strategy

One of the most important parts of a financial plan and preparing for higher inflation is a true evaluation of income needs that encompasses not just minimum expenses to live on, but the amount needed to fulfill the lifestyle that you chose. One must ask, if during a recession the market has one or more negative years, where will my income come from? Consider income from protected sources such as social security, pensions, and annuities, and what portion of those income needs are met utilizing those sources. If there is a gap, consider a careful drawdown strategy that may include fixed income, dividends, cash, and some principal to generate the remaining amount initially and then adjusting for inflation over time. The point of planning a carefully-thoughtout drawdown strategy is to minimize having to liquidate investments at the wrong time and hurting chances of recovering when things take a turn for the better.

Many different approaches can be utilized when implementing an inflation-protected retirement spend-down plan. It's important to remember that the plan is based on the individual—their short/long term goals and how much monthly income they need in retirement. Post-pandemic retirement planning is proving to be very different, so take the time to explore your options well in advance of retirement age.

We encourage you to sit down with an unbiased, independent financial advisor who puts your best interests first and helps you compose a written, personalized, and holistic financial strategy with the goals of protecting your retirement investments and securing the next chapter of your financial future.

To learn more, please attend Lawrence’s seminars “Investing in your Lifestyle,” held this January in Bridgewater, NJ, and Stamford, CT, and Tysons Corner, VA, in March. In the meantime, if you have any questions, feel free to contact Lawrence at 215-375-5984 or LawrenceT@CeteraWealth.com.

Investment adviser representative and registered representative of, and securities and investment advisory services offered through Cetera Advisor Networks LLC, member FINRA/SIPC Neither Cetera Advisor Networks LLC nor its representatives offer tax or legal advice. Please consult with your tax and legal advisors regarding your individual situation.

Tundidor Wealth & Investment Group is not a subsidiary of nor controlled by Cetera Advisor Networks LLC.