Pay Yourself First
Inflation doesn’t stop when you retire. Neither should your investments.
What This Means
Inflation doesn’t stop when you retire. That’s one of the biggest reasons we believe most retirees should remain invested throughout retirement.
A common misconception is that retirement means moving everything into cash. While cash plays an important role, relying on it alone may make it difficult to keep up with inflation over a retirement that could last 20 or 30 years.
Once you’re living off your investments instead of a paycheck, your portfolio has two jobs. It needs to provide the income you need today while continuing to grow enough to help protect your purchasing power in the years ahead.
There are many ways to invest, including stocks, real estate, and owning businesses. At PureVest, we prefer the stock market because it has a long history of creating wealth and outpacing inflation over time. While past performance doesn’t guarantee future results, history has shown that businesses have been one of the best ways to combat inflation.
The goal isn’t simply to preserve your account balance. It’s to preserve your purchasing power so you can continue living the lifestyle you’ve worked so hard to build.
Common Questions
Wouldn’t an annuity or bond that replaces my paycheck solve this problem?
Predictable income can be valuable, but retirement isn’t just about replacing today’s paycheck. It’s also about helping your income keep pace with tomorrow’s expenses. Inflation never stops, so we believe many retirees benefit from combining dependable income with investments that have the potential for long-term growth.
What is the inflation rate each year?
Over long periods, inflation in the United States has generally averaged around 2% to 3% per year, which is why the Federal Reserve targets inflation of about 2%. While a few percent may not sound like much, inflation compounds over time and can significantly reduce your purchasing power over a retirement that lasts 20 or 30 years.
I’m retired. Shouldn’t I invest more conservatively now?
It depends on your situation. Factors like how much guaranteed income you receive, your monthly expenses, the size of your portfolio, your legacy goals, and your comfort with market volatility all matter. We generally don’t believe owning individual stocks is the best approach for most retirees, but we do believe many retirees benefit from maintaining a diversified portfolio of investments with the potential for long-term growth. The goal isn’t to take more risk than necessary—it’s to find the right balance between generating the income you need today and helping ensure you don’t outlive your money.
Remember This:
Your portfolio still has two jobs: provide income today and growth for tomorrow.