Long-term investment strategies

If you are in retirement or near retirement, it may be tempting to place your savings into low-return conservative investments. However, you should also consider the risk that you may outlive your assets or that your assets will not keep pace with inflation.

When you are further away from retirement, time is your most powerful asset. It may be tempting to pull out of the market if you need extra cash or when the market is shaky, but being out of the market can cause you to miss valuable opportunities if stocks should rise.

Choose long-term investment plans for retirement considering inflation

Inflation has been one of the consistent facts of life in our economy. If the current inflation rate is 2%, over 20 years, it would raise the price of a $.42 postage stamp to $.62. How would it increase more expensive purchases?

• A $1,000 refrigerator would cost a little over $1,450.
• A $23,000 car would sell for a bit more than $34,000.

The longer you live, the more these kinds of price increases could affect your retirement lifestyle choices — unless your investment portfolio is designed to keep up with inflation.

Even at a moderate 2% rate, inflation can cut the purchasing power of your retirement savings almost in half over 20 years. If you're entirely invested in cash and short-term investments, these assets are likely to shrink in "real" value during a long retirement.

By comparison, stocks have historically outpaced inflation and provided strong returns over long terms. If you are concerned about losses in the stock market, consider long-term investment strategies in stocks and adjust your asset allocation to help manage volatility in your overall portfolio – without giving up all of its growth potential.

Enjoying a longer life with long-term investing

People are living longer these days, meaning your retirement savings may have to last a long time as well. How long? According to the Social Security Administration¹: 

• A 65-year-old man can expect to live, on average, to 84.2.
• A 65-year-old woman can expect to live, on average, until age 86.8.

Longevity trends suggest that these remarkable numbers will continue to rise.

Your total investment time horizon is longer than you may have thought. Depending on your age today, you could be creating and managing a long-term investment strategy for 20 years or more to ensure you don't outlive your retirement savings.

Market timing can be costly

It pays to stay with long-term investment strategies. History shows the markets have bounced back after losing value and it's likely this will happen again should major dips occur in the future. As the chart below shows, missing even a handful of days can have a long-term impact on your savings.