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Will Your Nest Egg Withstand Inflation and Market Volatility?

By Financial Planning, Investing, Retirement Planning

It’s no secret that inflation is on the rise, impacting millions of Americans. Mix that in with on-again off-again tariffs, and it’s a good time to assess if your accumulated wealth is being managed in a way that will outlast inflation and a volatile market. It’s important to note that a financial plan is never supposed to be stagnant, it’s supposed to change as your situation and world economic conditions shift. But anxiety around the market and inflation is still very real, so how can we get ahead of it?

Remember, Nothing Stays the Same Forever

In early April, we saw massive swings in market sentiment as Trump teetered back and forth about tariffs. While we all hope to avoid increased inflation or, worse, a recession, we have to be strategic in how we face challenges in the market. This is a good time to remember that the markets are similar to us in the sense that nothing stays the same. The challenges you faced in your early 20s are not the same ones you have today. How long they took to resolve may vary, but they never stayed forever. Imagine if you followed your initial knee-jerk, emotional reaction to those challenges you faced when you were younger. Making decisions based on emotion, especially fear, rarely helps you reach your goals, and frankly, they can sabotage you from ever getting close to them.

So, going back to our current market situation, what can investors do right now? Well, depending on their specific situation, the answers vary.

If You’re Young, or You Have More Than 10-15 Years to Retirement

If you have a long time-horizon to retirement, it may be best to wait it out, and continue to invest. A financial principle called “dollar cost averaging” might apply to you, as you may come out ahead in the long-term by continuing to “buy” during both market lows as well as highs through the years.

See the chart below:

This chart shows that those who exit the market the day after every -2% market move or worse over a 25-year time period usually underperform those who remain fully invested. When you leave the market, you don’t just avoid future bad days, you also miss out on the future good days. Ultimately, missing even just a few of the market’s best days, or getting back into the market only after the market is already up, can significantly impact long-term returns. Because, remember, just like in life, nothing stays bad forever; good days will come again. The market is no different.

If You’re Older and Getting Close to Retirement

As you get closer to retirement, continuing to stay in volatile stock markets exposing all of your savings to stock market risk probably doesn’t make sense due to a financial principle called “sequence of returns risk.” With all things being equal, someone who retires during a down market can see their retirement savings drop precipitously for the long-term if they start withdrawing funds, versus someone who retires when markets are going up. This is a very important consideration at the very beginning of your retirement when your account balance is at its highest, but unfortunately, no one has a crystal ball. You probably need to rebalance in order to reduce portfolio risk.

Consider Rebalancing Your Portfolio

First, you’ll want to ensure your portfolio’s ratios of international stocks, large-cap and mid-cap, bonds, cash, and fixed options make sense in the current economic environment. Different asset classes have varying cycles of performance, which can help address inflation headwinds. But keep in mind that there are other ways you can de-risk your portfolio, especially as you head toward retirement.

Sometimes considered a separate asset class, in the last few years, annuity sales have risen as 10,000 people per day turn 65 in America. An annuity is a contract between an individual and an insurance company designed to provide a monthly stipend during retirement. Some annuities even provide retirement income that won’t run out no matter how long you live, guaranteed by the financial strength of the insurance company providing the annuity policy. There are many different types of annuities, contracts can be complex, they are illiquid, and there should always be other cash and investments to balance out your retirement plan even if you have an annuity or annuities. Furthermore, annuities are not right for everyone. It’s advisable to work with a financial professional to look at your overall plan, compare your options, and closely examine contract terms.

Other Personal Actions You Can Take To Manage Inflation

Additionally, to help make your dollar in your day-to-day life last longer, do a thorough review of your spending. This is the time to evaluate essential vs. discretionary expenses, for example, a mortgage versus a new car. This gives you a chance to identify unnecessary spending that you can cut back on. Most people are shocked by how much they were spending on things they did not need!

Some common expenses that are good to look at critically during this audit:

  • Takeout & Dining – Frequent restaurant visits, coffee runs, food delivery, and takeout orders.
  • Subscription Services – Streaming (Netflix, Hulu, HBO Max), music, gaming, news, and fitness apps.
  • Retail & Impulse Shopping – Clothing, accessories, home décor, and non-essential purchases.
  • Unused Memberships – Gym memberships, fitness classes, warehouse clubs, and subscription boxes.
  • Premium TV Packages – Expensive cable or satellite plans with unnecessary channels.
  • Frequent Travel – Weekend getaways, flights, hotels, and vacation entertainment costs.
  • Luxury & Self-Care – Salon visits, spa treatments, manicures, and pedicures.
  • High-End Brands – Designer clothing, accessories, and premium tech gadgets.
  • Hobby Expenses – Collectibles, gaming, crafting supplies, and other leisure-related purchases.
  • Tech Upgrades – Constantly replacing smartphones, tablets, and accessories with the latest models.
  • Costly Entertainment – Concerts, sporting events, amusement parks, and other high-ticket experiences.

Also, see if you can negotiate on those essential bills. While many essential bills are a fixed amount, some can be adjusted or reduced. You may be able to lower expenses for service contracts like internet or insurance. You may also be able to lower your credit card rates. While there’s no guarantee, it never hurts to call a service representative and see if you can get a better price for the things you have to pay for.

While dealing with inflation and market volatility is no one’s ideal situation, it doesn’t have to be a nightmare either. With a strategic approach, you can get through this stressful time and on to the other side! Do you need help getting your accumulated assets inflation-ready and putting a plan together to hedge against market risk? Call us today! You can reach Bay Trust Financial in Tampa at 813.820.0069.

 

Sources

https://www.kitces.com/blog/clearnomics-10-charts-recession-fears-tariff-risk-market-volatility-economy-investor-anxiety/

https://www.limra.com/en/newsroom/news-releases/2025/limra-2024-retail-annuity-sales-power-to-a-record-%24432.4-billion/

https://www.aarpinternational.org/initiatives/aging-readiness-competitiveness-arc/united-states

 

These are the views of the author, not the named Representative or Advisory Services Network, LLC, and should not be construed as investment advice. Neither the named Representative nor Advisory Services Network, LLC gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.

Rebalancing investing involves risk including loss of principal. No investment strategy, such as rebalancing, can guarantee a profit or protect against loss. Rebalancing investments may cause investors to incur transaction costs and, when rebalancing a non-retirement account, taxable events will be created that may increase your tax liability.

Investing Alternatives During Periods of Market Volatility

By Investing

During periods of market volatility, investors may look to alternative vehicles. Here are some options to consider.

 

2022 was a difficult year for investors, with all three major market indexes dipping simultaneously and taking their biggest hit since the housing crisis of 2008[1,2,3]. Now, even with all three up through the first five months of 2023, volatility and uncertainty are stuck in the back of investors’ minds, possibly pushing them to look elsewhere for more diverse vehicles that have the potential to provide growth and protection.

Though diversification of assets certainly doesn’t guarantee success, it can play a major role in mitigating risk and achieving sustained growth. That’s why it can be a good idea to consider alternative or unconventional methods of investing and saving. Here are a few options you may have when looking to diversify your investment portfolio and avoid the pitfalls of the market.

Real Estate

Traditionally, investing in real estate involves purchasing property with the explicit purpose of renting to tenants for extra income or in hope that the value of the investment property appreciates. This can be a great way to earn steady income or returns, but it can come with risk. For example, it can be difficult to find tenants to live or work in your rental property, potentially leaving you stuck making a mortgage payment without collecting the rental income. There’s also the risk that the housing market can temporarily go soft, as it traditionally does when mortgage interest rates are high, or crash as we saw in 2008, leaving you underwater with higher property costs than the property’s market value.

Additionally, managing your rental property can be strenuous, whether that’s because of difficult tenants, maintenance costs or other ancillary costs and challenges associated with owning and renting property. It’s important to thoroughly research your investment property and have a plan to cover traditional costs associated with real estate, as well as a plan in the event that it becomes more difficult to find a reliable tenant or liquidate if you want to sell.

There are vehicles for investing in real estate where you are not involved in day-to-day property management, but these options have other risks to consider and should be undertaken carefully working with trusted financial, tax and legal professionals.

Art and Collectibles

Art and collectibles have historically been the province of the wealthy, but they can be used by some investors looking for more fun and creative ways to achieve long-term gains in value. It is, however, extremely important to consider the market demand for art and collectibles. Oftentimes, value is built around rarity or hype, meaning that these types of items can fluctuate greatly in price. For example, a recently deceased artist may command a higher selling price for their art, however, that price may plummet if tastes and styles change after the hype has long subsided.

It’s crucial to have a strong grasp on the market for the art or collectibles you’re looking to invest in, and you may want to only purchase items that you’d feel comfortable keeping at their purchase price point. Then, were the value of the item to drop, you can still enjoy owning it without the fear of taking losses on it as an investment. Additionally, some collectibles, like collector cars, antiques, wine or high-end sports memorabilia, come at a premium price, excluding many retail investors. Modern companies like Collectable and Rally are now giving investors a chance to invest in a portion of classic cars, baseball cards, and comic books, so while you may not be able to drive a 1955 Porsche, you may be able to participate in a fraction of its market appreciation.

Bank CDs and Treasury Bonds

Often looked at as safer investments with low risk and low returns, CDs and Treasury bonds can be a great option for those looking to stay away from markets during volatile periods. The two are similar in that they essentially function as loans. The difference, however, is whom your money is being loaned to. Bank CDs, or certificates of deposit, are lump sum investments with a bank or credit union that are guaranteed up to $250,000 by the Federal Deposit Insurance Corporation, or the FDIC [4]. They then earn interest for the duration of a predetermined period of time. Treasury bonds, on the other hand, are a loan to the government with specified interest rates for durations of either 20 or 30 years [5].

It’s crucial to know that during times of high inflation, banks usually raise interest rates paid on CDs to make their products more attractive to investors. That means that during periods of high inflation and high interest rates, CDs can be a more attractive investment. At the moment, interest rates are the highest they’ve been since 2008, potentially signaling a good time to purchase CDs [6]. While Treasury bonds also pay a predetermined interest rate over a set period of time, they typically lose value when interest rates rise as newer bonds with higher rates of return become more valuable. Both CDs and Treasurys are seen as traditionally safe and conservative alternatives to the market, but it can be a great idea to speak to your financial professional prior to purchasing either.

Annuities

Annuities are insurance products and contracts rather than investments, and though they are traditionally intended for those on the cusp of retirement, they can function as a vehicle for growth and future income. In the terms of those contracts, the insurance company typically guarantees features like principal protection, a rate of return or income for life, and those guarantees are based on the strength of their claims-paying ability. This is different from a market investment that doesn’t offer principal protection, potentially meaning that the funds you invest could plummet.

At the same time, some annuities like fixed indexed annuities can offer index-linked growth, potentially giving you the chance to earn market upside or growth in correlation with the predetermined index. These growth levels, however, can come with caps or participation rates, meaning you won’t always realize market gains at their peak. Additionally, many annuities tie your money down for a surrender period, meaning that you won’t have access to it unless you’re ready to incur a notable penalty. This could be devastating, especially if large amounts of money are tied up in an annuity when you find another opportunity that potentially presents greater advantages.

It can be extremely helpful to discuss your annuity options with a financial professional who understands annuities and has access to multiple products and insurance carriers in order to find a product that suits your unique situation and your goals. It can also be beneficial to work with an advisor who can weigh the opportunity costs of purchasing an annuity.

Life Insurance

Similar to annuities, life insurance policies are contracts with issuing insurance companies that offer benefits in exchange for premiums; however, there are multiple types of life insurance policies that offer different features. Term life policies, for example, typically come with low premiums for young, healthy people, but they only pay out if the policyholder dies in the predetermined term. Modern permanent life insurance policies present a few more benefits, giving policyholders the chance to secure the death benefit as well as a cash value portion that is protected and grows at rates guaranteed by the issuing insurance companies.

The downsides of permanent life insurance policies are similar to those of an annuity. For example, the cash value portion may not experience lucrative growth, and while growth is never guaranteed with any product, some policies are especially weak investment vehicles if you plan on using them specifically for the growth component. Furthermore, life insurance policies also come with surrender periods, forcing you to pay major fees if you claim the value of your policy early. While one of the positives does include the principal protection, that level of protection is only as strong as the insurance company you work with. It’s always a good idea to speak with your financial professional to see if a life insurance policy fits your needs and goals. Each policy is different, and your unique circumstances will dictate the effectiveness of that policy in relation to your objectives.

These are just a few alternative investment options, and just a few of the potential pros and cons. If you’re looking to avoid market volatility and protect yourself from downturns, we can help you explore your options. Give us a call today! You can reach Drew Capital Management in Tampa, Florida at (813) 820-0069.

 

 

Sources:

  1. https://www.macrotrends.net/1319/dow-jones-100-year-historical-chart
  2. https://www.macrotrends.net/1320/nasdaq-historical-chart
  3. https://www.macrotrends.net/2324/sp-500-historical-chart-data
  4. https://www.fdic.gov/resources/deposit-insurance/faq/
  5. https://www.treasurydirect.gov/marketable-securities/treasury-bonds/
  6. https://www.macrotrends.net/2015/fed-funds-rate-historical-chart

 

This article is not to be construed as investment advice. It is provided for informational purposes only and it should not be relied upon. It is recommended that you check with your financial advisor, tax professional and legal professionals when making any investment or any change to your investment portfolio. Your investments, insurance and savings vehicles should match your risk tolerance and be suitable as well as what’s best for your personal financial situation.

Variable Annuity (*if IAR is also a registered rep with a Broker/Dealer, variable annuity advertising may need to be filed with FINRA through their Broker/Dealer)

Variable annuities are offered only by prospectus. Carefully consider the investment objectives, risks, charges, and expenses of variable annuities before investing. This and other information is contained in each fund’s prospectus, which can be obtained from your investment professional and should be read carefully before investing. Guarantees are based upon the claims-paying ability of the issuer.

Variable annuities are long-term, tax-deferred investments designed for retirement, involve investment risks, and may lose value. Earnings are taxable as ordinary income when distributed. Individuals may be subject to a 10% additional tax for withdrawals before age 59† unless an exception to the tax is met.

Indexed Annuity

An indexed annuity is for retirement or other long-term financial needs. It is intended for a person who has sufficient cash or other liquid assets for living expenses and other unexpected emergencies, such as medical expenses. Guarantees provided by annuities are subject to the financial strength of the issuing company and are not guaranteed by any bank or the FDIC.

Indexed annuities do not directly participate in any stock or equity investment. Clients who purchase indexed annuities are not directly investing in the financial market. Market indices may not include dividends paid on the underlying stocks and therefore may not reflect the total return of the underlying stocks; neither a market index nor any indexed annuity is comparable to a direct investment in the financial markets.

Life Insurance: Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

Stock Market Volatility: It Helps to Look Backward

By Investing, News

Obviously, many of our clients are worried about the news, the headlines about coronavirus, and the drops in the stock market happening at the time of this writing.

As you know, our firm focuses a lot of attention on protecting your savings as you near retirement. But for some of our clients (depending on their unique circumstances), part of their portfolio—and/or part of their 401(k) or other retirement funds—are still subject to stock market risk. The reason for this is that based on historic return data: the stock market can offer the highest returns over time, and so might still be part of your overall retirement plan design.

The Stock Market Is a Long-Term Strategy

Some of our clients are all set with their retirement income plan, so their concerns are not for themselves. They are worried about their children and grandchildren, and how the stock market drops will hurt their loved ones’ finances.

We would like to remind everyone that it’s helpful to look backward.

The first market crash happened in Europe in 1634, when Dutch tulips bottomed out. (There’s a period movie called “Tulip Fever” that dramatized this one.) In the United States, the first major crash (and worst so far) happened in 1929. It took America 12 years to recover from the “Great Depression,” but we did recover, and went on to enjoy some of the greatest prosperity in our history.

But we’ve weathered more recent stock market collapses, too. Like the one in 1987 when “Black Monday” brought the largest single-day market loss in U.S. history. And there was the Dot.com bust of 2000. And of course, the “Great Recession” of 2008.

The thing is, historically every eight years or so we have experienced some sort of market correction. We were well overdue for this current market volatility; it’s been 12 years of experiencing primarily a bull market since 2008. Our firm has been talking with our clients about the possibility of a market correction for the last four years; indeed, we’ve been planning for it.

We view the stock market as just one of the tools in your financial planning arsenal—the tool with the longest timeline. To quote Warren Buffett: “The stock market is a device for transferring money from the impatient to the patient.”

In other words, although no one can predict the future, based on historic market performance your children and grandchildren probably have time to recover, and most likely, prosper. (This might even be a good time for them to pick up some bargains, depending on their circumstances.)

For you, if you do not have a retirement plan in place to help balance growth plus protection of your assets in volatile times, please call us. There are options to investing in the market.

Contact Drew Financial Private Capital in Florida toll free at 1.833.DREWCAP or 813.820.0069.

 

 

Source: https://en.wikipedia.org/wiki/List_of_stock_market_crashes_and_bear_markets


References to J.W. Cole Advisors, Inc. (JWCA) are from prior registrations with that company. J.W. JWCA and Advisory Services Network, LLC are not affiliated entities.