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Dear Marion,
Greetings,
In the last several weeks, we have continued to face elevated uncertainty in financial markets due to high inflation and rising interest rates. It has been a difficult year, not only for investors but also for households and businesses as we all navigate higher prices and borrowing costs. There will be some challenges ahead for the economy as the Federal Reserve (Fed) continues to raise rates to control inflation. We believe the Fed is doing the right thing for the long-term health of the economy, but it does increase near-term economic risks.
There is a high level of pessimism but there are also some positive signs as well. We often see a bump in the stock market after a mid-term election, no matter which side comes out ahead. November through April have been historically strong months for stocks. And we are seeing some decrease in gas prices, rents and other areas which should help inflation numbers to moderate.
While we don't know when this uncertainty will end, we want to remind you that we have planned for these types of volatile markets. Short term predictions are very frequently wrong and we know the futility of trying to time the market. In managing your accounts, we rely on the longer term trends we have seen in the markets decade after decade. We have weathered many of these types of storms before and we will do so again.
Please reach out if you have specific concerns or just want to be reassured about your situation. We are here to help you through the tough times as well as the good.
The Financial Steward Associates Team:
Marion, Heather, Lindsay, Harmony, Stephanie, and Sid
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“As the seasons change so do we. May we be aware we are shifting just like the wind.” | |
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News and Events
October 2022
Issue #119
Important Updates:
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It's time to start thinking about RMDs. You'll need to take your RMD by December 31st, 2022 in order to avoid tax penalties. If you have questions about the RMD status of your account(s), please contact us.
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Many of you have already activated your Account View 2.0 profiles. Please reach out if you have questions or need help logging in for the first time or retrieving documents, reviews, or statements from your Account View.
You can login here: www.myaccountviewonline.com
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Make a plan of action for embracing the season ahead. We found these 2 articles that focus on preparing your home for the change, as well as a shift in mind and body.
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It's National Life Insurance Awareness Month, which provides a great reminder about this important tool, and the impact that life insurance can have on a family or business after the death of a loved one, key person, or owner. | |
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Everything's Better with Bacon
It even makes understanding inflation easier.
Let’s face it: talking about bacon is always fun. It can even help illustrate a topic that has been in the financial media a lot lately — inflation. In 1991, the price of a pound of bacon cost $2.22 (according to the Bureau of Labor Statistics). Thirty years later, in August of 2021, a pound cost $7.10. That’s inflation at work. Inflation is simply the rise in the cost of living, and it eats away at your money’s purchasing power and may not buy as much retirement in the future as it does today.
Over the past several months, inflation has crept back into the financial media limelight. Last year, price increases began to grow out of pandemic-related shutdowns and supply chain disruptions. As an example, the Consumer Price Index, a key measure of inflation, climbed 5.4% in September of 2021 compared with the prior year.
Keep Inflation in Mind in Your Retirement Planning
When you retire, one thing is a given: the cost of basic necessities as well as other things you enjoy will continue to rise. The following table provides some hypothetical examples to help increase your awareness of inflation.
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| Item | 2021 | 2051 | | Pound of bacon | $7.10 | $17.23 | | Dozen eggs | $1.71 | $4.15 | | Gallon of milk | $3.68 | $8.93 | | Cup of coffee | $2.70 | $6.55 | | Pound of boneless chicken breast | $3.18 | $7.72 | | Round of golf (public course) | $61.00 | $148.00 | | Dining out weekly - monthly cost for one couple | $232.00 | $563.00 | | |
2021 prices are based on Kmotion Research and general averages, including data from the U.S. Labor Department’s Bureau of Labor Statistics. Projections for 2051 prices assume a 3% annual inflation rate. | |
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Get Real With Inflation
When managing inflation risk with your investments, it’s important to understand a couple of basic terms. Your nominal rate of return is the amount of money you make on an investment before expenses — this rate of return does not take inflation into account. Your real rate of return is the nominal return on your investment minus the inflation rate, and gives you a better sense of the purchasing power of the money you make from your investments. For example, if your investment portfolio earns an 8% rate of return in a particular year, and the inflation rate is currently 3%, your real rate of return is just 5%.
Conventional wisdom says you should consider keeping an appropriate amount of your assets allocated to stocks and stock mutual funds to help offset inflation risk. Although past performance is no guarantee of future results, historical average stock returns have stayed ahead of inflation over the long term.
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This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.
Kmotion, Inc., 412 Beavercreek Road, Suite 611, Oregon City, OR 97045; www.kmotion.com
©2021 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this newsletter are those of Kmotion. The articles and opinions are for general information only and are not intended to provide specific advice or recommendations for any individual. Nothing in this publication shall be construed as providing investment counseling or directing employees to participate in any investment program in any way. Please consult your financial advisor or other appropriate professional for further assistance with regard to your individual situation.
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Financial Steward Associates
303-444-5440
fax 303-444-6049
Jackson, Lincoln Financial, Pacific Life, Prudential, Financial Steward Associates and LPL Financial are separate entities.
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Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Financial Steward Associates, a registered investment advisor and separate entity from LPL Financial.
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