Inflation is on many people’s minds. Anytime they purchase something, they’re probably noticing a rise in cost. This is especially evident at the gas pump. 

A big worry of mine is that we’ve been lulled into a false sense of security. It’s a mistake to assume everything will remain the same with inflation occurring inside of your plan. Your Financial Advisor needs to adjust your plan to fit the  new lay of the land, and the new lay of the land includes inflation increases.Over the last 40 years, inflation has been around 4%. So, if you haven’t done so already, it’s critical for you to see your financial planner to start stress-testing your plans for higher inflation.

There have been years where interest rates have been higher than 4%. There have been others where interest rates have been below 4%.But now we’re experiencing gas prices at the pump going up. Food at the grocery store is increasing  And you shouldn’t leave your financial plan stationary. Financial plans created for Osiwala Financial Group clients account for medical insurance rising at about a 7% rate. Likewise, other living expenses were previously calculated at an inflated rate just in case we were wrong on the inflation numbers somewhere else. So, if your financial plan hasn’t been stress tested or is only accounting for the old inflation rates at 2-2.5 %, I would advise you to talk to your Financial Advisor to see if the plan needs to be recalculated.

Do you have a comprehensive financial retirement plan, or an investment strategy that incorporates inflation? Based on my experience, many people confuse a financial plan with their investment strategy, but the investment strategy is only a tiny piece of the overall retirement plan. The plan is designed to answer where you want to go, and how you want your life to look. What are all the resources that you have? When will you take Social Security? What taxes will you pay? How will you handle risk management, and the proper asset allocation? There are so many different components that go into a comprehensive retirement plan that accounts for inflation in the future. 

At Osiwala Financial Group, we use a process to build and oversee retirement plans called the Guided Retirement System (GRS). It’s like a GPS system in your car that helps you stay on track with what you need to do to successfully reach your retirement goals. Unfortunately, many people don’t have a Financial Advisor who uses such an integrative process. For the last decade, I have been seeing prospective clients coming in for a second opinion on their current financial plan with another firm, and those plans typically account for 2-2.5% inflation during their retirement. If this 7+% inflation lasts for a sustained period, those retirement plans will probably fail. This may drastically alter the client’s lifestyle because they’re not going to be able to afford to do the things they wanted to do because the costs have increased drastically.  

One of the headwinds people have moving into retirement is the fear of the unknown. And part of that unknown is what things will cost in the future. And, if you don’t have a retirement plan, it can cause a different kind of anxiety. 

A week or so ago, I had a couple in my office, and the husband seemed to have it together. However, the wife was anxious because they were brand new to my office. They came in, sat down with us, and while they had millions of dollars, they didn’t have a retirement plan. They had spent years saving their money but had never met with anyone to create their retirement plan. I sat across the desk from them and asked them if they had a blueprint of how they wanted to live their retirement life. Had they considered how to spend this money, allocate it, and get the income out in the most tax-efficient way in retirement? Knowing the answers to those questions would eliminate a lot of the anxiety they have about their  future because as you move down the road, you don’t know what the unknown is. It can be scary! My job is to recalculate that for my clients to eliminate anxiety. The best part of that conversation was that they understood the strategy! They suddenly realized they had all the materials to build the house but lacked the blueprint to put it together. And they aren’t the only ones who didn’t have a living, breathing plan that is consistently updated.

This is why using our Guided Retirement System is so valuable. My wife and I recently drove back from Florida, and our GPS kept us on the right road and going in the right direction. The GPS told us when we had accidents slowing traffic and alternate routes we could take. Our GRS works in the same way. The GRS is the piece that connects all the moving parts because once you move one part, another part moves. You make a decision, and suddenly, you may have created a tax problem.

If you don’t have a comprehensive retirement plan, you don’t have clarity, and the lack of transparency is where the uncertainty and anxiety come from. Contact my Osiwala Financial Group Advisors and request a complimentary consultation. You can do that by clicking HERE.