Jack Howley Explains How Macroeconomic Considerations Play Into Retirement Planning

Examples of Macroeconomic Principles

Macroeconomics as a subset of economic considerations covers such large-scale movements as overall economic growth, full employment, and price stability. Macroeconomics measures overall economic activity within a country and around the world. Income, output, inflation, and business cycles all play into macroeconomics.

The Microeconomic Approach to Retirement

Most current retirement advice falls into the microeconomy category, concerning the retiree activities only. Retirees are continually encouraged to save more money. Incentive programs like tax-deferred savings accounts help to stimulate nest eggs and increase investment in the economy.

Applying Macroeconomic Principles to Retirement

Many financial protection experts like Jack Howley believe that taking a macroeconomic approach to retirement planning provides a more forward-looking and less reactionary method for growing wealth.

Drivers for Investment Returns

Three primary factors drive investment returns. Most of these can be explained through macroeconomic principles:

How to Correlate Retirement Savings and Macroeconomics

One of the most important ways to connect retirement savings to the macroeconomic view is by choosing assets that are both correlated and uncorrelated to the performance of the economy as a whole.

Analyzing Assets in Terms of Correlation

Experienced financial advisors who are interested in working with macroeconomic principles work with statisticians to create charts of how asset prices have changed in relation to each other. Pairing assets results in a number that marks their correlation. Creating a correlation matrix of this type means that advisors can easily see which pairs of assets should be picked up.

The Macroeconomy and External Events

Political and other macroeconomic events can interfere with retirement savings by impacting income and living expenses. These include changes to Social Security, tax law changes, inflation, or recessions. It is best to hedge against these events by diversifying a portfolio as much as possible and avoiding having all of a person’s assets tied to the performance of the economy as a whole.

Expanding Portfolios Based on Macroeconomic Factors

Investment strategies using macroeconomic factors are highly diversified in risk and reward. Weighting macroeconomic factors equally can help to maximize the benefits of diversification.

Final Thoughts

Jack Howley recommends that all retirement investors begin looking past the microeconomic considerations of wealth planning, including increased savings and spending pattern changes, and toward macroeconomic methods of adjusting their portfolios. Working with the economy’s strengths and weaknesses presents a long-term view that could be beneficial for the individual investor.



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Jack Howley

Jack Howley

Entrepreneur and expert in assisting corporations and individuals in meeting their wealth creation and protection objectives. Located in Rumson, New Jersey.