Still Not Ready

Inflationary pressure is one of the biggest concerns for retirees and pre-retirees today, says Jim Jessee, President of Boston-based MFS Fund Distributors, and although they might be doing their best to provide for future rises in inflation, many report they’re unprepared to deal with a rising cost of living.

Part of the problem is education. “When clients say that they’re set for retirement, advisors need to sit them down and make them go through everything, ask them probing questions about what they have and what they will need,” Jessee says. But countering the effects of rising inflation also has a lot to do with the investment choices people make, he says, and clients should work with their advisors to formulate a retirement income plan that balances their need for a reliable, steady stream of income with an investment strategy that seeks capital appreciation to lessen the effect of inflation on purchasing power.

To that end, Jessee would recommend investing in products such as MFS’s recently-minted Diversified Income Fund, a vehicle that is designed to suit the risk temperament of those heading toward retirement and also provide a good hedge against future inflation. Combining conservative and yield-generating assets (namely government debt and corporate high-yield bonds, among others), the fund also allocates about 40% of its assets under management to instruments like emerging market debt and REITs, which are there specifically to counter inflation in the future.

“In our product development, we saw a need to address inflation because we saw that most affluent Americans are very concerned about inflation, and that even if they have enough now for their retirement, it won’t be enough in the future,” Jessee says. “We believe that the market will be seeing more products [like the MFS Diversified Income Fund] in the future, because we have moved away from finding clever ways to accumulate [wealth] toward coming up with creative ways to distribute it.”