The theme this week on the Retirement Quick Tips Podcast is: Why You Shouldn’t Retire in 2022

Today, I’m talking about why inflation and the fact that higher inflation is still getting worse should give you pause and make you think twice about retiring this year. 

A problematic, but very possible outcome for 2022 is that we have higher interest rates. This may help bring inflation down, but the stock market has been a little drunk on lower interest rates for years, and it now seems clear that the Fed is going to put the cap on the whiskey bottle and raise rates multiple times in 2022.

Big businesses have been enjoying cheap financing for a long time and higher interest rates will expose lower quality stocks with higher debt loads. This is already happening as unprofitable companies have been taking a beating in Jauary with the prospect of higher interest rates. 

I believe that higher quality stocks with strong fundamentals, low debt, and dominant positions in their industry will be more immune to a downturn in stock prices due to higher rates, but they will likely still see some shocks. 

Higher interest rates also mean lower bond prices, so even if you’re more conservatively invested with less of your portfolio in stocks, you’re still exposed to the current Fed policy and the likelihood of higher interest rates and continued inflation in 2022.

Do I think the stock market or the bond market is going to crash? No. The first few weeks in January has prompted some worried phone calls from clients, but I don’t believe we’re heading for a market crash.

But if you’re on the edge of being financially ready to retire in 2022, a blow to your portfolio in year one coupled with higher inflation which means potentially higher withdrawals from your investments will only make the problem worse. So for that reason I would take a pause and make sure to stress test your portfolio, make sure it can handle a downturn of 10-20% in value and not compromise your plan for retirement, before deciding to hand in your notice in 2022.

That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the Retirement Quick Tips podcast. 

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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance