Inflation

A recent poll commissioned by Nuveen, TIAA’s investment manager, found high-net-worth investors well aware that inflation and interest rate risks could affect their investment income.

At the same time, many investors had a different understanding of how those factors might influence their investment portfolio and what they could do in a rising-rate, high-inflation environment.

(Related: Ed Yardeni Says Don’t Underestimate Trump’s Economy)

The Harris Poll conducted an online survey in the late winter among 1,010 U.S. adults 21 and older with at least $100,000 in investable assets who were primary or shared decision makers on finances for themselves or their family, and were currently working with a financial advisor.

In a statement, Nuveen noted that the survey findings, released Tuesday, were the latest extract from the study, and followed the release in July of findings that focused on avoiding loss and guarding gains.

The new survey results showed that three-quarters of investors trusted their personal experience of inflation more than statistics calculated by the Labor Department.

How reliable is this gut feeling?

Most respondents said they carefully monitored inflation as they planned for retirement, invested or spent money.

Some seven in 10 investors correctly recognized that inflation was low at present, and they largely understood that retirees experienced higher inflation rates than the norm.

Yet, 60% incorrectly said the U.S. inflation rate was 5% or higher or admitted that they were not sure. Only 32% came near the real number of 2% to 3%.

Three-quarters of survey respondents agreed that the economic situation would make investment planning more complex.

Eighty-six percent of investors reported that they had experienced high interest rates in their lifetime, including 79% of millennial respondents.

Still, many were uncertain what happens to bond values when the Federal Reserve Bank increases interest rates:

  • 40% believed bond values will increase
  • 30% said they will decrease
  • 30% thought bonds’ value will remain the same or did not know

In the event of a Fed interest rate hike, 52% of respondents said they would likely make an investment change, and 48% were either very or totally unlikely to make a change.

Eighty-one percent of millennials, however, said they would likely make changes to their portfolio.

Advice on Income Strategies

Nearly all respondents in the survey agreed on one matter: They were interested in income strategies that keep up with inflation.

Across all age groups, investors were especially likely to want to know how to generate income in retirement, and wanted an advisor to help them better understand how the cash income could come from their portfolio.

Seventy-seven percent of investors said they relied on their financial advisor to a moderate or great extent for help with retirement income planning.

Fifty-six percent said that in the next six months, they would consult with their advisors about a portfolio able to generate a steady cash income stream while preserving capital.

— Check out Recovery From Great Recession Never Happened for Many: San Francisco Fed on ThinkAdvisor.