Weekend Reading: Should You Change Your Financial Plan Because of Short-Term Changes in Inflation and Monetary Policy?

This article appears as part of Casey Weade's Weekend Reading for Retirees series. Every Friday, Casey highlights four hand-picked articles on trending retirement topics and delivers them straight to your email inbox. Get on the list here.
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Weekend Reading

Inflation continues to circulate headlines and ignite fear of an unpredictable future, but the good news is, a well-rounded retirement plan can weather the storm (short-term or not).


Your financials and the Fed: In order to safeguard your lifelong savings from inflation, it’s important to understand the affect it can have not only on your retirement nest egg, but the economy as a whole. Ultimately, money supply, economic growth and their tie-in to inflation is all controlled by the Federal Reserve Bank (The Fed). Their job is to align maximum employment with price stability through targeting the federal funds rate – the rate at which banks lend money to each other.

The bottom line is, the Fed is “the bank” of all banks, and in order to maintain a target federal funds rate, it will pull various strategies and tools, which at present, has included increased reverse repo activity (Reverse Purchase Agreements). By making this move, the Fed is able to slow the growth rate of the money supply, while also incentivizing financial firms to deposit money back.

What’s to come? In the end, how this plays out into the future of inflation is unknown, but when it comes to looking at the short or long-term stability of your retirement plan, inflation risk should always be factored in. If you’re feeling uneasy about the inflation effects we’re seeing now, it’s time to take a deeper look at your retirement strategy, as well as follow some simple suggested items included here:

📌Postpone big ticket purchases, or buy used

📌Drive slower and less often to save on gas

📌Review and revise your government allocations, such as inflation-protected securities (TIPS, I-Savings Bonds)

Make note: I am in no way emphasizing the “suggested items” in this article. That’s not why I shared this with you. Instead, I hope you find it insightful regarding the levers the Fed is – and can – pull to control the economy and inflation. At the end of the day, your plan should be prepared for any eventuality, allowing you to disregard the noise.