There are several risks investors must consider when building portfolios to achieve financial goals. Inflation is an increasingly important risk for investors, particularly for retirees. In a recent survey1 , we found that inflation was cited as the most significant threat to retirement security, rated more than twice as highly as other risks, including longevity risk, market risk, and healthcare risk.
Asset classes have historically addressed inflation risk differently. For example, certain investments, such as cash, have historically had higher returns when inflation expectations are higher. Alternatively, other investments, such as real assets, particularly commodities, have historically performed better when actual realized inflation exceeds expectations (something known as unexpected inflation).
1 Online survey was conducted by Morning Consult from October 23rd to November 1st, 2024, which included 1,003 full-time workers between the ages of 55 and 65 who were participating in an employer-sponsored 401(k). Responses are weighted to be nationally representative. Inflation was cited as the top threat by 41.7% of respondents, followed by poor market returns at 20.4%, followed by outliving savings and healthcare expenses, both at 15.4%, then caregiving expenses at 5.2%, and then other at 1.9%.
PGIM DCS - 4599046
David Blanchett
Managing Director, Portfolio Manager and Head of Retirement Research
|PGIM DC Solutions
david.blanchett@pgim.com
Jeremy Stempien
Managing Director, Portfolio Manager and Strategist
|PGIM DC Solutions
jeremy.stempien@pgim.com
