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Easing Inflationary Fears for Older Generations

June 7, 2022
By: Marc Balcer, CFA®, Senior Vice President and Director of Investment Strategy

Couple reviewing their finances

With inflation at 30-year highs, many Americans are worried about what this means for their wallets. During the last few months, I’ve seen that older clients are the most concerned about how inflation could impact their financial security.

What is causing the worry?

Over the past two years, the United States has experienced extreme economic volatility due to factors such as the coronavirus pandemic and geopolitical tension. So far this year, inflationary stress has continued and now we must also consider additional interest rate hikes from the Federal Reserve. It seems that it’s the over-60 crowd who is the most worried about the financial impact. But why exactly is this?

  • Clients aged 60 and above remember the inflation of the 70s and 80s. They remember high gas prices, markets struggling, and rising prices on essential goods. Today’s record inflation levels are paired with ongoing geopolitical tension, continued pandemic headlines and news of interest rate hikes. Inflation levels were low for a very long time, so this quick exposure to high inflation is much more uncomfortable than a slow and steady increase.
  • Retirement is a big life change often with many unknowns. Those who have worked hard their entire life can struggle to suddenly find themselves with so much additional free time and this often leads to extra focus on their investment portfolio and how they are going to manage. But the reality is, when you cross over into retirement, your world doesn’t completely change. You don’t stop investing in your portfolio, and many people continue to work in different jobs and towards personal goals. When considering what you've saved for retirement, it’s important to realize that even if we have inflation for a period of time, a well-diversified portfolio will likely stand the test of time.
  • Many older parents worry: Are my kids going to be okay? Older generations nearing retirement know how high inflation felt when they were young, and this new wave of inflation is causing quite a few to worry about how their children and grandchildren will fare in the current inflationary environment. Many retirees today cannot relate to the financial priorities and career trajectories of millennials and Gen Z. These younger generations have different goals for both spending and saving. They also have higher debt levels (mainly due to student loans) and are more likely to make multiple job changes. In some cases, these differences contribute to the fear that the older generation has for their younger children and grandchildren.

How can fears be eased?

Going “back to the basics” and ensuring there is a strong financial foundation is a great first step to ease worries. It is important to focus on budgeting and saving at a consistent, maintainable rate. Individuals and families can also create a conservative spending plan and set goals to aim towards. Putting energy into your financial future can help alleviate the anxiety induced by external factors that you can’t control.

It is also important to lean into what history has shown us. During our lifetime, we will live through many economic ups and downs, but the trajectory of the stock market over the long term has been an upwards slope. A good course of action is to stick with the plan you have developed with your advisors and remain invested. While it is important to recognize the emotions of fear and uncertainty, it is often helpful to find room to pause so decisions are based on careful thoughtful and not emotion-driven reaction.

Navigating your financial journey can be challenging, but the advisors at Girard are here to help you meet your financial future with confidence. Contact us to have a conversation.

 

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This article is for general information purposes only and is not intended to provide legal, tax, accounting or financial advice. The information in this article, and any opinions expressed therein, do not constitute a recommendation or an offer to buy or sell any security or financial instrument. Viewers should consult with their financial and/or legal professionals before making any financial decisions.