There are reasons to be optimistic about 2022, but there are also reasons to be worried: Everyone is wondering if we will see more inflation in 2022, where the market is headed, and the effects of a new COVID variant. But whatever 2022 holds, it’s important to make a plan for the future.

The Federal Reserve’s Latest Statements

Wholesale inflation rose at a record annual rate of 9.6% in November. After months of saying that high inflation was just “transitory,” the Federal Reserve has indicated its plan to control inflation. The central bank said it will accelerate its monthly bond purchases and may increase interest rates three times in 2022. Their expectation for core inflation next year is 2.7%.1

Inflation In the Past

Inflation can hurt purchasing power, which can weigh down economic growth. The last time the inflation rate was over 5%, the U.S. was in the Great Recession.2 Some economists are predicting a 1970s style stagflation in this decade since we also saw higher energy prices and unemployment in 2021.3 Consider what would happen if we continued to see high inflation for years on end. Your savings would lose purchasing power every year as the cost of everyday items increases. For example, after 20 years with a 2% inflation rate, $1,000,000 would only have the buying power of $672,971.4

What Does This Mean For You?

When we think about how much everyday items cost when we were kids versus now, we can see the effects of inflation over time. In 1960, a gallon of milk was 31 cents, and today it’s $3.03 on average.5 Overall, the buying power of $100 in 1960 now has the buying power of $11.24.6 In order to combat this and have your savings last throughout your retirement, you’ll need a more sophisticated retirement investing strategy. This can be difficult, especially when safe investments like CDs offer very low returns and the market is unpredictable.

There are those who watch things happen and those who make things happen. Be the second kind when it comes to your retirement. A solid financial plan can help you be prepared no matter what the future holds. The first step is to to sign up for a complimentary review with us.


Sources:

  1. Fed Will Aggressively Dial Back its Bond Buying, Sees Three Rate Hikes Next Year
  2. History Suggests a Stock Market Crash Is Likely: 5 Data Points of Concern
  3. Why Economists Are Talking About Stagflation
  4. Inflation Calculator – Save Enough to Account for Inflation
  5. Historical Home Prices: Monthly Median Value in the US from 1953-2021
  6. The Inflation Calculator

Disclosure:

Investment advice is offered through APO Financial Services, LLC (“APO”) 10155 Westmoor Drive, Suite 175, Westminster, Colorado 80021-2627. APO Financial Services is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration with the SEC as an investment adviser should not be construed to imply that the SEC has approved or endorsed qualifications or the services Eric Scott Financial and/or APO Financial Services offers, or that its personnel possess a particular level of skill, expertise or training. Additional information pertaining to APO’s registration status, its business operations, services and fees, and its current written disclosure statement is available on the SECs Investment Adviser public website at https://apofinancial.com/disclosure/.