The 3 biggest threats to your retirement savings in 2022

The 3 biggest threats to your retirement savings in 2022

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Estimated read time: 4-5 minutes

It's hard to get economists and financial analysts to agree on much of anything. But most experts agree the new year will bring significant financial headwinds unlike anything we've seen in the past several years.

If you're retired or nearing retirement, these challenges could be especially dangerous for your nest egg.

These are three of the biggest threats to your retirement savings in 2022.

Threat #1: soaring inflation

Are you concerned about inflation? If so, you're not alone. According to CNBC, "More than 7 out of 10 investors (71%) believe that rising inflation will negatively impact their retirement savings."

Inflation hasn't been on anyone's radar for decades because rates were so low. But that swiftly changed in 2021 when inflation hit the highest rates in nearly 40 years. The fed tried to brush it off by saying it was "transitory," but the monthly Consumer Price Index report told a different story. Inflation rates kept climbing. And it wasn't temporary.

Today, every single American is feeling the sting of higher prices. You're paying more for groceries, gasoline and just about every household staple. Prices for real estate, construction, new and used cars, and travel have also gone through the roof.

"Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hitman," said Ronald Reagan.

The people who get hit the hardest by inflation are those who are in or nearing retirement. Here's why. When everything is more expensive and you're living on a strict budget, you're either forced to make steep sacrifices to your lifestyle or take bigger withdrawals from your savings, which could cause you to run out of money far too soon.

Threat #2: Higher taxes are coming

In the past couple of years, the government has spent trillions of dollars on economic stimulus, new infrastructure and social policy bills. As a result, our national debt has soared to nearly $30 trillion. What does that mean for our economy? And how does it impact you?

Economist and inflation expert Peter Schiff explained it perfectly, "When it comes to stimulus, most people forget that it has to be paid for. Government doesn't have money of its own. It has to take it from the private sector before it can spend it… It's either taken through taxation today or borrowed and taken through taxation tomorrow."

In other words, the government must raise taxes to pay for this $30 trillion in debt. There's no other way to pay for it.

We're not certain what these tax increases will look like, but we could see significant hikes on federal income taxes, capital gains taxes, corporate taxes, estate taxes and the taxes on your tax-deferred retirement accounts.

Any tax increases could impact you directly or indirectly. But even if you're not considered wealthy, you could still feel the effects. This is especially dangerous if you're in or nearing retirement. Higher taxes on your IRA, 401K and other tax-deferred accounts could leave you with a fraction of the money you were counting on for retirement.

Threat #3: It's going to be a challenging year for investors

We've all been through a lot with the pandemic including isolation, disease and death. Despite a short correction caused by the pandemic, investors have had it pretty darn good lately. Nobody can argue that. According to a recent post in the Wall Street Journal, "Between the beginning of 2019 and the end of 2021, the S&P 500 returned 100.4%, counting reinvested dividends." So, the S&P doubled in just 3 years. That's quite a performance.

The post went on to say, "The last time U.S. stocks doubled in only three years was from 1997 through 1999 -- just before they fell by 40%."

The fed recently committed to raising interest rates to tighten its monetary policy. (Soaring inflation may cause this to happen sooner than originally anticipated.) So, it's safe to say you should not expect the same stock market returns in 2022. Some economists have been arguing for a while that the stock market is overvalued and a correction is imminent.

"Sometimes there are times to make money (in the stock market). Sometimes there are times not to lose money," said David Tepper, billionaire investor and hedge fund manager.

The closer you are to retirement, the less appetite you have for risk. Any potential portfolio losses coupled with your need to make consistent withdrawals could deplete your savings faster than COVID canceled air travel in 2020.

How to grow your nest egg in the new year

So, it begs the question—Given these significant headwinds, how do you grow your nest egg today?

Our response is simply this: When you're faced with a challenge, sometimes it's best to go around the mountain.

Believe it or not, the fastest and safest way to grow your nest egg this year could be by lowering your taxes in retirement. After all, the less money you pay the IRS, the more money you keep in your pocket.

Not many people think of tax planning as a way of growing their wealth. But if you take advantage of some little-known strategies, you could save tens of thousands, if not hundreds of thousands of dollars in taxes.

To learn exactly how much money you could save in taxes when you retire, schedule a free, customized Retirement Tax-Savings Analysis with a fiduciary who specializes in retirement tax savings, click here or just give us a call at 801-216-3683.

Ryan Thacker and Tyson Thacker for B.O.S.S. Retirement Solutions

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