ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Inflation risk is most acute for retirees and near-retirees who live on fixed incomes, according to financial experts speaking at CNBC’s Financial Advisor Summit. They may have a tougher time adjusting to higher consumer prices than workers, who continue to get paychecks.

Detailed explanation-2: -As inflation rises, it creates both winners and losers. Right now, it’s mostly losers. Inflation benefits those with fixed-rate, low-interest mortgages and some stock investors. Individuals and families on a fixed income, holding variable interest rate debt are hurt the most by inflation.

Detailed explanation-3: -High rates of inflation and rising prices could lead to more stock market volatility, which would be more damaging to retirees who are constantly withdrawing from their investment accounts.

Detailed explanation-4: -Impact of Inflation on Fixed Income Investments The interest rates generated through fixed-income investments are generally lower as compared to the higher rate of inflation. Bond prices are inversely rated to interest rates. Inflation causes interest rates to rise, leading to a decrease in value of existing bonds.

Detailed explanation-5: -Does inflation affect fixed-rate mortgages? If you have an existing fixed-rate mortgage, inflation will not affect your current mortgage. Unless you refinance or recast your mortgage, you’ll pay the same amount every month.