3 Reasons Why a Robust Retirement Plan Matters Even More in 2022 (and What it Means for You) Think of 2022 as your most important retirement investing year ever. Here are three reasons why.

This year, 401(k) plans held an estimated $7.3 trillion in assets and represented nearly one-fifth of the $37.2 trillion U.S. retirement market, according to the Investment Company Institute. This refers to employer-sponsored retirement plans (both defined benefit and defined contribution plans), individual retirement accounts (IRAs) and annuities.

That's a lot of money. But do those numbers reflect the amount you've saved? Do you have your ducks in a row when it comes to your retirement savings? Are you saving at least 10% of your salary in a retirement savings vehicle (or ideally, more than 10%) and have you chosen an asset allocation that meets your future needs?

It might be more important than ever to get your retirement savings priorities straight because of the confluence of many national and global events that will happen this year. Let's walk through why you want to ensure you meet your yearly retirement goals.

Reason 1: Inflation will likely persist.

That is, high inflation persists, as anyone who goes to the grocery store or buys gas can attest. The producer price index, which tracks wholesale and manufacturing costs, soared to new heights this year to mark record levels, according to the U.S. Bureau of Labor Statistics. The producer price index rose 0.6% in October, which resulted in a 8.6% increase year over year — the highest since 1990.

Economists say that higher prices will likely last well into next year, if not beyond.

Certain assets that can benefit in a higher inflationary environment, though many experts say that investing in stocks is one of the best ways to battle inflation. Here are a few other options you can look into:

• Treasury Inflation-Protected Securities (TIPS): These Treasury bonds protect against inflation because the principal amount increases when inflation goes up. TIPS pay interest twice a year, which is calculated on the principal amount so investors will earn higher interest rate during periods of increasing inflation. TIPs are issued in 5-, 10- and 30-year increments and you can buy them directly through the federal government or through an online broker.
• Dividend stocks: Dividend stocks pay you dividends and it happens when part of the company profit goes back to you, the shareholder. Dividend stocks can offer a hedge against inflation because you can generate an income stream along with a stock's natural appreciation in value.
• Diversification: You've always heard that diversification in general is a good idea, but did you know that it can help you against inflation? Having a well-mixed variety of many different assets can offer an inflation hedge when you build it around various types of inflation-resistant assets and asset classes — it could grow at a faster rate than inflation if carefully stacked.
• Commodities: If you can't beat 'em, join 'em. Commodities often see a lot of inflation, so adding some money to something that's probably going to keep zipping upward can be a great approach. Consider investing in grain, precious metals, electricity, oil, pork, natural gas and more — the sky's the limit to the number of commodities you can invest in.
• Real estate: Consider adding real estate to your portfolio, whether in the form of real estate investment trusts (REITs) or real estate that you buy on your own. REITs refer to companies that own and often operate income-producing real estate. Real estate is a great option in a rising-inflation environment because rising prices increase the resale value of a property over time and can charge rental income that rises over the course of time as inflation rises.

Putting together a retirement portfolio is your best chance at beating inflation, particularly when you put a priority on growth and carefully consider the type of assets available to you.

Reason 2: Interest rates could go up.

The Fed may start raising interest rates by the middle of 2022. We may even see more than one rate hike by the end of the year, according to the CME FedWatch tool. What does this mean for you?

Here's the deal: Rising interest rates usually happen during periods of economic strength. This means that increased rates could mean we'll hit a bull market. You want to take advantage of any bull market by putting money into your retirement funds. Interest rates going up can mean great things for your portfolio, so make sure you have one set up before the end of the year to take advantage of a potential bull run.

Reason 3: Slower economic growth could occur.

After the 2020 disruptions, Americans looked to growth in 2021. At first, it looked like GDP would grow in the first quarter of 2021, and it grew 6.4% on an annualized basis. In the second quarter, GDP grew even faster 6.7%. However, the third quarter of the year was hampered by lowered consumer spending and supply chain bottlenecks, and the inflation increase, supply chain interruptions and the labor deficit didn't help.

What does all of this have to do with your portfolio? In response to slower economic growth, a robust retirement portfolio will help you if you personally face job loss — particularly if you invest for the long term in investments independent from your employer.

During a recession, stock values often decline, but that gives you an opportunity to stock up on lower-priced stock, allowing you to invest more cheaply. (Think of it as a stock sale at bargain basement prices.)

Ready to Put Your Retirement Plan Together?

It's not too late to get started pulling your retirement plan together if you haven't already done so. You may also want to evaluate the contents of your current portfolio to see if it makes sense going into the new year.

Furthermore, if stocks do go down next year and you already have money in a current portfolio, leave investments alone — that way, you won't make recession-related losses permanent when you sell.