Tags: Retirement | retirement | deflation

5 Ways Deflation Affects Your Retirement Plan

By    |   Thursday, 11 June 2015 09:54 PM

Retirement planning can be stressful. While most seniors are concerned about how inflation can affect their retirement planning, the opposite, deflation, also can cause problems.

In general, deflation is the reduction of prices, which can make a retirement dollar go further. However, it also signals a less healthy economy, which can take a toll on investments.

Here are five things retirees should consider about deflation and retirement planning.

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1. Stock prices can go down or stagnate with deflation
Investments may take a hit if the economy is experiencing deflation. If companies are taking in fewer dollars because they have to sell their products for less money, that can negatively affect stock prices or stop the growth of investments for those planning to retire.

2. That Social Security Check will go further
The Social Security Administration is set up to offer automatic raises for inflation called Cost of Living Allowances. These adjustments are based on the Consumer Price Index. Deflation will not cause them to go down.

3. Interest rates will go down
In an effort to stimulate the economy, the government usually lowers interest rates, which can adversely affect the price of stocks and securities. This is bad news for people expecting retirement nest eggs to grow.

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4. It makes old debt very bad
The best way to protect retirement savings from deflation is to get rid of old debt. Bankrate Inc. recommends paying off loans to protect from holding debt on items that are worth less than you owe.

5. It can put your job at risk
For those hoping to retire, deflation can spell disaster, if it means a job goes away. The best way to maximize retirement income is to work as long as possible. Deflation puts many companies in the position of having to eliminate jobs. For people hoping to work a few more years to maximize their pension benefits, deflation can also take a toll.

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Retirement planning can be stressful. While most seniors are concerned about how inflation can affect their retirement planning, the opposite, deflation, also can cause problems.
retirement, deflation
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2015-54-11
Thursday, 11 June 2015 09:54 PM
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