October 13, 2023- As you think about ways you plan to enjoy retirement, whether it is far in the future or just around the corner, it is natural to worry about your money. In times of economic uncertainty, those worries may escalate.

Navigating Inflation and Talk of a Recession

For many, the past few years have felt like unprecedented times. Planning for retirement can be overwhelming in an environment where:

• Economists constantly predict a looming recession.

• The rate of inflation is the highest it has been in decades.

• Rapidly rising interest rates are causing bond prices to decline sharply.

It’s no wonder that some non-retirees have little confidence in achieving a comfortable retirement.

It seems that one of the media’s favorite ways to encourage website clicks is to present a worrisome headline about how inflation or higher interest rates or some economic catastrophe is right around the corner. Despite how easy it is to get lost in the news of the day and the uncertainty of the economy, there are practical steps you can explore to be more comfortable with your retirement plan.

Stress-Testing Your Cash Flow Plan

Managing your cash flow is an important aspect of your financial plan. Having a process to control and understand total income, expenses, and how your cash comes in and out of your accounts is a predictor of financial success over time.

If you are nearing retirement, creating your cash flow plan is important, as you must adjust to life without wages from your job. For many people, this adjustment can be unnerving. It can feel like you are about to jump off a cliff the closer you get to your retirement date. Fewer retirees have pensions available to them. Many pre-retirement workers have fears about Social Security’s future. Planning for future required distributions (RMDs) can be confusing. Developing a cash flow plan specific to your situation may help you better prepare for the future and give you confidence that your retirement plan is sound.

When you have a cash flow plan, you allow yourself to wrap your arms around how much you are spending each month. It then becomes easier to build out financial projections that can be stress-tested. At Timberchase Financial, we provide financial projections for our clients, but it is our clients who are nearing retirement or in retirement who are the most interested in reviewing these projections regularly. We run scenarios to see the impact on a retirement plan if economic or personal circumstances change. This can include events like a recession, lower than expected returns, and higher inflation. Working through this process helps consider contingencies to feel confident the retirement plan can withstand uncertainty the future holds.

Avoiding Discouraging Financial News and Focusing on What You Can Control

With 24-hour news channels, email news subscriptions, and social media, we have access to constant breaking news, and every day seems to bring a new crisis. In the past year, we have seen a U.S. debt downgrade by Fitch, high inflation, rising interest rates, bonds and stocks declining in the same year, and record high federal debt. Each of these experiences is important; however, none of them are unprecedented. Listening to news providers and pundits may make it feel like we are living through unprecedented financial times, but one doesn’t have to go back far in history to find similar conditions. Through all of these events, the economy has recovered, and people have been able to retire comfortably.

When it comes to a financial plan, it is important to focus on what can be controlled and let what can’t be controlled take care of itself. The financial news of the day is filled with stories designed to turn attention to things well beyond our control. Recognizing this and turning attention instead on continuing to save, managing cash flow, tax planning, and having a defined investment plan can help adopt the disciplined, long-term perspective we encourage.

At Timberchase Financial, we provide thoughtful and comprehensive retirement planning advice. If you would like to start a conversation about how our CERTIFIED FINANCIAL PLANNER™ professionals may be able to help with your retirement plan, please contact us.