The Wall Street Journal laid out how retiring investors should adjust their expectations for inflation and markets.
Three things retirees should consider, per the Journal:
1. In March, inflation hit a high of 8.5 percent, reflecting increased energy and food prices along with wages. Economists expect prices to even out, though they expect a more aggressive federal response beforehand with its short-term policy rate nearing 3 percent in this rate cycle. At the beginning of the year, the rate was near zero.
2. An air of uncertainty remains in the market due to high inflation, rising interest rates, conflict in Ukraine and slowing corporate profit growth. Chris Hyzy, chief investment officer at Merrill and Bank of America Private Bank, told the Journal that he predicts 2022 to at best manage a single-digit gain unless the aforementioned obstacles improve.
3. Long-term prospects are also facing challenges because of interest rate levels and historically higher valuations in certain markets, according to an analysis by mutual fund Vanguard. Vanguard predicts the average annual gains in U.S. stocks will only be around 3 percent to 5 percent over the next decade. Last year, the S&P 500 Index saw an increase of nearly 27 percent.