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I’M IN THE HABIT of checking my investments every day. Since I consolidated them into one Fidelity Investments’ account, it’s easy to see the impact of market movements on everything I own. I don’t depend on my investments for income, but it still shakes me up when I see big drops, especially several days in a row.
If market gyrations affect me, what must they do to retirees who depend heavily on their investments for income? I posed that question on a retirement planning Facebook group: “If you are now retired or very close to retiring, have the recent stock market gyrations plus inflation shaken your confidence in your retirement financial plan?”
To my surprise, only a handful of responses showed any concern. Most folks displayed remarkable confidence: “Our plan accounts for all this.” “Our plan is solid.” “Our plan is pretty well protected against market and inflation risk.” “Market correction is expected and planned. My portfolio is fully diversified.” “No. One quarter of poor stock market performance following the best year in ages and several strong years in a row does not shake my confidence in the least.”
Perhaps I’m the one who is too fiscally conservative. But I’m also thinking these folks, who take the time to discuss retirement issues on Facebook, aren’t typical.
There’s another world out there, those Americans with little or no investments to worry about and for whom inflation is a far greater concern than what the S&P 500 does next week. Only slightly more than half of Americans own stocks, including in retirement plans.
Rick Delaney, chairman of the Senior Citizen League, which is lobbying for a onetime $1,400 check for seniors, says the group has heard from thousands of seniors who have “exhausted their retirement savings, started eating only one meal a day, started cutting their pills in half because they can’t afford prescription drugs. [These are] just a few of the drastic steps so many have had to take because of what inflation has done to them.”
What’s the truth? Research looking at the impact of inflation found that Americans age 65 and older were affected the least. Because of inflation, seniors find themselves spending an additional $194 per month, while those ages 45 to 54 were spending $305 more. Still, if you’re living mostly on Social Security, having to spend an extra $194 can be a big hit.
If you are living mostly on Social Security than most of your income is indexed to inflation. Seems to me that in this case inflation isn’t much of an issue.
On the other hand, those who depended on a fixed pension to cover a significant part of their basic expenses have a very real problem with inflation. Same for those who depend on their investments to cover basic expenses.
True it’s not actually fixed income. However, an increase of 5.9% on the typical SS benefit for anyone retired a number of years is about 83.00 and from that subtract the Medicare Part B premium increase of $21.60. If the research above is anywhere close to accurate that retiree has fallen about $160 behind.
I was stunned by the opening paragraph of
The post.
As I recall, you had no sympathy for retirees
complaining about high IRMMA costs, which
could affect long term resiliency of retiree
portfolios which have to cope with the twin
evils of financial repression and inflation.
Being affluent at 70, as I said at the time,
does not insure affluence at 80 or 85.
But even though you are not dependent
on your portfolio, the volatility “shakes you
up”.
I see a lot of tension between these two
positions.