Achieving a Successful Retirement Part 3: Inflation is the Real Risk

Hi, I’m Chad Ekren.

In retirement, many investors are worried about protecting their principal instead of protecting their purchasing power. We make the mistake of believing that “stocks are too risky” during retirement. In the short term, stocks are risky. Let me give you an example:

Financial Crisis

During the Financial Crisis between September 2008 and March 2009 there were nine days when the S&P 500, which represents the US stock market, declined between 5% and 9% in one day! That’s an extreme short-term risk. However, you should note that over this same time period, the S&P 500 also had 9 days when it went up anywhere from +5% to 11%, again, just one day! In the short-term, stocks can be very volatile, however, over longer periods of time, the risk of losing principal from a broadly diversified portfolio of equities reduces to zero. According to 2014 Morningstar Research, there has not been one 15 year period since 1926, when we include dividends being reinvested, in which the S&P500 has had a negative return.

Retirees should plan for a longer retirement

On the other hand, the risk of inflation is extremely low in the first year of retirement. But over time, the cost of living slowly increases and it has no finite limit!

Principal risk vs purchasing power risk

Once again, according to 2014 Morningstar Research, the average inflation rate for the past 87 years in the United States has been 3%, which means that...

To sustain a lifestyle at 3% inflation, a $60,000 income today would need to be $93,000 in 15 years and $145,000 30 years from now.

Are you starting to realize how important it is for you to determine your Successful Retirement Number? That is, the amount of money you need to accumulate to produce a lifestyle sustaining income and a legacy for those you love.

I congratulate you for being interested in learning how to achieve a successful retirement. And I encourage you to watch our next video when we talk to you about the solution to the real risk and that is Rising Income Investments.

If you’re ready, and you need how help, give us a call and we’ll help you determine your Successful Retirement Number.


This video was prepared solely by Chad Ekren, Joe Goncalves, and Geoffrey Perrin who are registered representatives of HollisWealth®, a division of Industrial Alliance Securities Inc., a member of the Canadian Investor Protection Fund (CIPF) and the Investment Industry Regulatory Organization of Canada (IIROC). The views and opinions, including any recommendations, expressed in this video are those of Chad Ekren, Joe Goncalves, and Geoffrey Perrin alone and not those of HollisWealth®. Capital Concepts and Capital Concepts Group are personal trade names of Chad Ekren. HollisWealth®, a trade name of Investia Financial Services Inc.