Most experts agree it’s not a matter of if we will have future inflation; it’s a matter of when we will have it.
Inflation is the rising cost of goods and services over time. You may notice the price of everything from your coffee to your cotton shirt rising. Like termites invisibly gnawing at the foundation of a house, inflation slowly eats away at the value of a dollar over time.
What does it mean for your retirement?
Rising prices tend to beget more rising prices and interest rates could head in the same direction. Do you know how your retirement and other investment accounts are positioned to withstand an inflationary period with rising interest rates?
Bonds can be an important part of your investment strategy; however, with rising interest rates the price of the bond will fall, with longer maturities feeling the biggest impact. For example, according to a T. Rowe Price Analysis, if interest rates rise by just 1%, the price of a 30-year treasury bond would decline by 14.3%.
If you haven’t considered the impact of inflation and rising interest rates, now is the time to do so, or seek the advice of a financial advisor. Schedule a complimentary consultation with BECU Investment Services.