Being newly retired or approaching retirement during an inflationary period can be very difficult. 

You may have found your retirement accounts, such as 401k’s, IRA, and investment accounts, have taken a hit in the last two years or so. There’s a lot of commensurating going around.

Even with these hits to the market, don't ignore your statements. Right now is a great time to position your portfolio to take advantage of the upswing in the market.

I’ll present you with some strategies to help you understand savings programs and how you can create a portfolio for savings and income that you can live with.

Seek Out A Financial Advisor

I’m constantly suggesting you seek out the advice of a financial advisor. That recommendation will never change.

The advisor will work with you to understand your needs, goals, risk tolerance, and timeframe and create a financial plan that can be a roadmap for you.

They can recommend investment choices that are best for you and shore up the weaknesses in your plan. They will learn how you feel about money and what you want and need your money to do for you. They will uncover obstacles that you may not have considered.

How Retirement is Affecting Patients with Blood Cancer and Their Families 

Retirees affected by a disability are more likely to start off retirement with fewer assets.

As a result, the values of their household assets can be significantly lower than those of non-disabled retirees. 

Here are some staggering statistics: 
One in three Americans age 65 or older have at least one disability. Your blood cancer can count as a disability. 

Consider the ramifications of the possible inability to continue to earn a living prior to age 65, as well as continue to save for retirement as a result of the disability.

Add on the other possible burdens of a spouse leaving work early to be a caregiver.  This affects many aspects of retirement, from preparedness to debt levels, and monthly spending.

According to an Issue Brief published on April 20, 2023, by Bridget Bearden, the following are key findings regarding retirees with serious illness or disability:

• More than half (61 percent) of disability-affected retirees said they saved less than was needed for retirement, compared to 41 percent of non-disability-affected retirees.
• Disability-affected retirees were more likely to start off retirement with fewer assets and subsequently have lower median average values of household financial assets than non-disability-affected retirees. In fact, non-disability-affected retirees have 2.3 times the average current assets of disability-affected retirees.
• Disability-affected retirees were less likely to report that they have an “easily manageable level of debt”  and more likely to report having debt outstanding across all types of debt as compared to non-disability-affected retirees. Credit card and medical debt stood out as the largest difference with respect to debt prevalence.  

Credit card and medical debt are where a lot of disabled-affected retirees can make a significant impact on their personal finances. Look at debt consolidation and hospital charity programs, as well as reduce discretionary spending, especially in an inflated economic environment.

Savings Rates in the United States 

This may surprise you! In July 2023, the personal monthly savings rate (as a share of disposable income) amounted to 4.1%, up from 3.5% in July 2022. 
Guess what the savings rate was from April -May 2020?  It was a large 32%. 

Of course, because of COVID, very few people were spending. In fact, the high savings rate helped propel the inflated housing market.

In April 2021, the rate was 12.3%. We saw a precipitous fall to the current 3.5% in July. Inflated dollars helped to eat up income, therefore reducing savings.

The repeated conversations around the continued viability of Social Security should give everyone pause.

Even if it doesn’t go away completely, one must consider the possibility of reduced benefits, increasing the retirement age, or maybe even both.

Any of these scenarios will affect the greater population and, to a greater extent, those who are already financially challenged.

Increasing your Discretionary Income

According to SMARTASSET.com, discretionary income is the amount of a taxpayer’s earnings that remains after subtracting income taxes and other mandatory costs, like rent, mortgage payments, food, transportation, or insurance. 

You can see that essential spending and nonessential spending is very subjective.

When you do a budget and see where your financial weaknesses are, you will quickly see where your earnings are going.

If you really tried, can you find some unnecessary or, perhaps, even wasteful spending? Curtailing this nonessential spending can open avenues for paying down debt, covering medical expenses, and increasing your financial health in general. 

Some possibilities of nonessential spending can include:

• Eating out versus making food at home 
• Unused or extra subscriptions for things you don't truly need/watch/eat
• Personal or household items or upkeep for those things that are unnecessary 

When To Take Social Security to Maximize Benefit

Be aware of the effect on your retirement income if you take Social Security before full retirement age or at the age of 70. Understand the tax implications on your Social Security benefits.

If you take out your benefits before your full retirement age, a Social Security benefit is reduced 5/9 of one percent for each month that you take out benefits before the normal retirement age, up to 36 months before you turn 70.

If the number of months exceeds 36, then the benefit is further reduced by 5/12 of one percent per month.

Retiring early and taking social security benefits at age 62 can reduce your benefit as much as 30%.

Delaying your benefit until age 70 will yield the highest benefit. No additional increases by way of credits are given after age 70.  

Know Your Income Buckets

1. Short-term bucket: This bucket should hold the money you need to cover your expenses for the next two to three years. These funds should be easily accessible and liquid in the event you need to get to them quickly and frequently in order to cover living expenses. Cash and short-term investments are included in this basket, as well as savings accounts, money market funds, and short-term bond funds. These are low-risk investments that should provide a reliable source of income. Because they are low-risk, the returns are modest, but they provide stability.
2. Intermediate-term bucket: This bucket's assets should cover expenses from year 3 - through year 10 of retirement. The money in this basket should continue to grow to keep pace with inflation. However, funds should not be placed in high-risk investments. These could include longer-maturity bonds and CDs, preferred stocks, convertible bonds, growth and income funds, utility stocks, REITS and more. Working with a financial professional can help you determine the investments that will meet your financial goals.
3. Long-Term Bucket: This bucket of investments should mimic historical market returns. This bucket should grow your net egg more than inflation while also allowing you to refill your immediate and intermediate buckets. Long-term bucket investments are invested in riskier assets that may be volatile in the short term but have growth potential over ten years or more. The investments in this bucket would generally include longer-term investments such as growth funds, annuities, stocks, etc.

Reviewing Options for Accessing Retirement Plan Assets

Be aware of the advantages and disadvantages of rolling over or transferring retirement funds, or taking a loan, or withdrawing from retirement funds. You need to be aware of all your options and their associated consequences.

You don’t want to make a move without understanding the tax ramifications, associated fees, access limitations, distribution choices, or investment choices. Again, this is where a financial advisor is invaluable.

Understanding your retirement income options is important to know before you retire. Planning years before you retire is optimal.

Still, if you are newly retired or soon to retire, there's still a lot you can do to avoid costly mistakes.