With inflation averaging about 3% historically over the years, for most, year to year, that's not a huge deal. However, when looking at a retirement period of 20-30 years, it becomes a bigger deal.
During retirement, some assets become at risk when adjusting for inflation for diversifying among asset classes rings true in this case, explains Jaime Hopkins, Forbes Contributor, Associate Professor of Taxation at the American College and Associate Director at the New York Life Center for Retirement Income. Dividend and fair dividend equities fair okay when dealing with inflation but that's a slightly riskier asset than most people would like to be in towards the later part of retirement. Moving over to bonds and CD's, while they feel safer, when compared to inflation right now, they may not be that much safer because their payouts are lower than what we expect inflation to be, Hopkins further explains.
There are products out there that offer better safety, such as various types of annuities, which offer some stream of payment. These products do offer inflation protection but also provides an increase in payments each year, which could satisfy other retirement needs, such as long-term care costs.
Jaime Hopkins, Forbes Contributor, Associate Professor of Taxation at the American College and Associate Director at the New York Life Center for Retirement Income, spoke with Retirement News Today during this interview, providing online retirement news video content. Retirement News Today is a featured network of Sequence Media Group.