Q&A: Smart Ways to Manage Your Money in Uncertain Times

As an educator, union leader, and financial planner for active and retired educators, I am acutely aware of the uncertainty many of us—especially retirees—are experiencing about the state of our country and economy. One particular source of anxiety is the Trump administration’s ever-changing approach to tariffs. It’s still unclear which goods and services will ultimately be impacted by these tariffs, how much they will be impacted, and how long those impacts will last. Many of us have questions about what this all means and how we can best protect ourselves during uncertain times. 

Here are answers to some of the most common financial questions I receive from retired educators:

I’ve heard that tariffs could lead to inflation. Is that true?

Yes, tariffs are inflationary because the companies that import goods into the U.S. are forced to pay a tax on the imported goods. These costs are generally passed on to consumers. Due to potential tariffs, U.S. consumers may see prices rise on an array of goods and services, including gasoline, clothing, groceries, cars, and even car insurance.

I’m on a fixed income. If prices go up, will my Social Security and pension be adjusted each year to keep up with inflation?

Seniors are especially vulnerable to rising prices because Social Security cost-of-living adjustments (COLAs) are based on the spending habits of working people, and seniors tend to spend more on health care costs, which increase faster than the general rate of inflation. So your expenses may go up faster than others, but the COLAs may not keep up. Also, many state pensions have only a partial adjustment, or no adjustment at all, for inflation.  

So, if you are on a fixed income, you are correct to be concerned that your income may not increase at the same rate as your personal expenses. (See the box at the end for tips on how to protect yourself from inflation.)  

What can I do to ease my worries about the economy while still being savvy about my investments?

Many financial mistakes are caused by rash decisions. Avoid this by meeting with a financial planner to review your plan. (Be sure the planner is a fiduciary, which means the planner is legally and ethically required to act in your best interest.) And don’t wait for the next crisis to evaluate your plan, as “good times” are often the best times to make adjustments.

Also, make sure you have an emergency fund. How much you need depends on your individual circumstances: Are you a homeowner? How old is your car? Are you likely to face unplanned medical expenses? Having a financial buffer can help you cover the expenses that don’t fall within your regular budget.

It is critical that your emergency fund is protected from inflation. Many people hold their cash in savings or checking accounts, which often pay close to nothing in interest. You can likely get a solid interest rate on your savings by using a high-yield savings account, a quality money market mutual fund, or a short-term certificate of deposit (CD). Talk to your bank about their offerings, but be sure to compare their rates to those available beyond your local bank. You can research the best rates through websites like NerdWallet or Bankrate.

Part of my retirement savings are invested in the stock market. How can I protect myself financially in a turbulent market?  

There’s no denying that stock market fluctuations can be scary. But historically, stocks have been the best way to beat inflation over the long term. For example, over the past 50 years, the U.S. stock market has returned over 10 percent per year, whereas government bonds have returned about 6 percent. There are obviously a lot more ups and downs along the way in the stock market—like when the stock market dropped 50 percent during the 2008 financial crisis, which it took 4 and a half years to recover from.

For retirees, who need to rely on their portfolios for income, a broadly diversified portfolio can help weather downturns. That can mean investing in a mix of U.S. stocks, international stocks, small company stocks, government bonds, and precious metals, such as gold. In almost every downturn in the last half century, at least one of these assets increased. So, a broadly diversified portfolio may help you sleep better during a crisis.

Take heart in knowing that during that same time span, the average length of a downturn was just over two years until recovery. Because you may be retired for decades, owning stocks may still be a critical part of your overall strategy for long-term financial stability and beating inflation.

Taking even one positive step can help you feel more secure, regardless of the financial curveballs that may come your way. Uncertainty doesn’t have to mean that we are powerless to make proactive choices to improve our lives.