Dec 15, 2022 3 min read

Most families are feeling the pinch from inflation at this time. This includes millionaires.

Because of the bull market that ended this year, there are estimated to be nearly 24.5 million millionaires worldwide. This is more than any other time in history, yet, 35% of this select group says it is going to take a miracle to be ready to retire.

This may be partially a reflection of seeing their portfolios down 20% and feeling the crunch of inflation when they go shopping. People approaching retirement or in the early stages of it are vulnerable to sequence of risk return. Market losses during the early part of the distribution phase can wipe out large market positions when withdrawals are also coming out of these accounts.

A study by Natixis Investment Managers found, “58% said they accept that they will have to work longer and 36% worry that retirement may not even be an option.” If these high-net-worth individuals are concerned, so are many other people.

Since we had such a long bull market, people got spoiled and only thought the market could go up. We had such a low rate of inflation, many consumers and even fund managers forgot what it took to deal with high inflation.

While the stock market offers the best opportunity for growth, it also has lots of risks to a stress-free retirement. That is why investors need to create their own pension plan that provides guaranteed income no matter what the stock market does. It also is important to have sufficient emergency money to handle everyday surprises. You do not want to go into debt or borrow from retirement plans to pay for emergencies.

Most economists and many planners are warning to be ready for a recession in 2023. No one knows if the Federal Reserve is going to be able to engineer a soft landing or not. During a recession, many people could lose their jobs. It will become more difficult to find work. The FED has a rough balancing act to try and pull off to slow down inflation and not disrupt the economy too much. It will likely take the stock market some time to recover. You should not expect values to claim as fast as they did the last few years because there will be strong head winds.

One good things at the start of the year will be Social Security checks going up 8.7%. This is one of the largest increases of all times. Somewhat surprisingly, Medicare Part B premiums are going down a few dollars to $164.90 per month. Most years, any SS gain is offset by higher Medicare premiums. It is important to remember that this cost-of-living increase is designed to maintain seniors’ purchasing power even and not to increase it.

Your Financial Future is written by certified financial planner Gary W. Boatman, MBA and CFP, who also wrote the book, “Your Financial Compass: Safe Passage Through The Turbulent Waters of Taxes, Income Planning and Market Volatility.” If there is an area that you would like to see discussed in the column, send your suggestions to gary@BoatmanWealthManagement.com.