Thursday, May 14, 2015

401K Stability and How You can Plan Around Inflation

One of the most common steps most people take to prepare for retirement is to invest regularly in their 401k accountHowever, one of the most common concerns investors have relates to inflation and how it impacts the growth of their investments. 

If you are concerned about how inflation may impact your 401k going forward, you are wise to do so. Inflation can have a detrimental effect on value of your account, and the 401k account return needs to exceed the rate of inflation to have true net growth. Choosing the right investments is a necessity if you want to protect and grow the value of your account over time. 


When you make wise stock selections for your 401k account, you will be taking a step to protect your account balance from the effects of inflation over any amount of years. Stock prices may be relatively volatile over a short period of time. 

However, because companies can adjust prices and expenses to compensate for inflation, this is generally a sound long-term investment to consider to protect your growth from the effects of inflation. This is particularly true when you buy stocks in companies that have a solid history of long-term growth and great growth potential. 

Do your research before you find a secure place to invest in. Once you know where the stocks will grow you will have a better chance of finding a secure retirement. Research is the key here to know where you will get the most bang for your buck.

Short-Term Maturity Bonds

English: US CPI inflation (year-on-year) from ...If you are looking for a relatively stable investment vehicle with minimal risk, bonds are a great option. However, a fixed income asset like a bond can be significantly impacted by inflation. The best bet when investing in bonds with inflation in mind is to choose a short term bond. 

These are less impacted by inflation as well as by movements in interest rates. For those approaching retirement age, moving more funds into short-term bonds may be advantageous. Talk to your bank or financial counselor to see what your options are and what will be best in your situation.

Real Estate

There are different ways to invest in real estate through your 401k account. For example, REITs, and stocks in large real estate investment firms provide you with some options. Real estate is largely seen as one of the best investments to make as a hedge against inflation. The value of the best real estate investments typically rise with the rate of inflation. 

Of course, the housing market is cyclical and has its ups and downs. As a long-term investment, however, this is a sound investment to make. It’s best to talk to a professional about where you can get involved and how you can invest in your own property. A company like the Jakob Pek Fund will know the best ways to direct you through real estate investments you decide to make.

Don’t Forget Savings

It’s also important to invest in some regular savings accounts. Whether it’s your emergency fund or just savings account at the bank you should always have some backups in mind to keep money safe for whatever retirement throws your way.

Understanding how inflation affects investment vehicles is necessary when your goal is to minimize the impact of inflation on your retirement account value. By learning about the best investments to make to safeguard your account against inflation, you can create a diversified portfolio with long-term growth in mind. You can have more in your retirement fund than you ever thought possible if you know where to place your money.

1 comment:

  1. Ensure that you are calculating your risks to enjoy the payouts from investing into the retirement plans. Putting your money in stocks has always had a certain degree of risk with some being bigger and thus more dangerous than others.


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