3 economic factors to monitor in retirement

Key Points

  • Market and economic fluctuations can have a larger impact on retirees than during their working years.
  • Keep tabs on inflation, interest rates and the stock market.
  • Regular talks with your advisor can help you stay on track with your goals amid changes in the economy and markets.

Once you retire, the inevitable fluctuations in markets and the U.S. economy can have a different effect on your investment portfolio compared to when you were working. While Ameriprise economic experts believe underlying fundamentals are currently strong across U.S. corporations and the economy is well supported, regular check-ins with your advisor can help protect your retirement savings over time.

1. Inflation fluctuations

Economists expect moderate inflation rates to continue, which could help you more easily maintain your cost of living, even after moving funds to more conservative investments with lower expected return rates.

That said, keeping an eye on inflation is important — even a 2 percent inflation rate means that in 10 years, today’s $100 will be worth only $78. In addition, the cost of many goods and services that retirees rely on, such as health care, often rise faster than the rate of inflation.

Talk often with your advisor as inflation rates change so you can stay on track with your retirement goals and proactively adjust your withdrawal strategy if needed.

2. Interest rates

Interest rates may have a limited impact, since you’re less likely to take on a new mortgage, car loan or credit card in retirement. Relatively low interest rates are likely to continue the rest of the year, but if you do plan to take out a loan for a larger purchase, talk to your advisor to see whether borrowing in the current rate environment will support your long-term financial goals.

Retirees also tend to hold more bonds with greater perceived safety than stocks in their investment portfolios. Bonds may help mitigate risk from lower corporate earnings and lower stock prices, which tend to follow rising interest rates. Your advisor can properly weigh the mix of stocks, bonds and other investments in your portfolio to help keep you on track toward your goals.

3. Stock market shifts and corporate earnings

In addition to having the right investment mix, your investment portfolio should keep growing to accommodate your evolving income needs. Ameriprise believes that:

  • Trade, earnings and interest rates are the fundamentals that will drive stock prices through 2019.
  • The economy is likely to expand at a modest pace this year, and there is attractive value in stock prices for long-term investors willing to stomach some near-term volatility.

Global factors, such as international trade disagreements, could slow growth and dampen profits. It’s a good idea to work with your advisor to stay focused on your goals, ensure your allocations are consistent with your longer-term risk profile and make sound investment decisions based on informed, rational reactions to news headlines.

Check in regularly

In addition to having a deep understanding of your investment portfolio and retirement goals, your advisor keeps a close eye on economic forecasts and other research from Ameriprise experts. Together, you can fine-tune your portfolio to evolve with economic and market fluctuations to help you continue enjoying a confident retirement.