3 Ways to Beat Inflation

Inflation is real and a serious threat to your retirement plan. Living comfortably on $8,000/month now could mean a second job 20 years from now considering historical inflation rates. In this post, I want to cover three things you can do now to beat inflation later.

  • That sounds simple but many of you have not considered the impact inflation will have on your retirement savings plans. If your advisor has not asked you how much income in today’s dollars you would like to have during retirement THEN adjusted that number by at least 2% for every year you are shy of retirement, then you are not planning to beat inflation. Everyone thinks they will need less money in retirement but that’s a lie! People are retiring today with car payments and 20 years left on their 30-year mortgage. You are not going to spend less in retirement. In fact, you will most likely need more money in retirement due to inflation and higher income tax rates going forward. Note: The Trump tax-cuts from 2017 are set to expire December 31, 2025.
  • Payoff Debt. Again, this sounds simple but most of you are doing the opposite. It is reported that 63% of retirees age 65 or older have debt. This is up from 38% in 1980. Reports vary but today’s retirees are carrying around $150,000 in debt. If you have adequately funded your retirement accounts and will receive guaranteed monthly income to support this level of debt, then knock yourself out. Some retirees, however, have accumulated more in debt than they have saved for retirement! This is financial suicide. As you approach retirement, you should consider downsizing your home. You probably don’t need the extra space now that the kids are gone. Even if you own your home and don’t have a mortgage, down-sizing now will allow you to cash-out on some of your equity which can be converted into additional retirement income. You will also reduce your property taxes, homeowners’ insurance and utilities. Score!
  • Make your money work as hard as you do. I know. You have a trusted advisor. He’s a college buddy and has managed your money for years. Are you holding him accountable? Let’s face it, working with family, friends or someone you go to church with is hard. You’re reluctant to question them because you don’t want to disrupt the relationship. Guys, your financial success is at stake. If there is a safer alternative that pays a better rate with lower fees, you have to cut bait; and the sooner the better. Whose retirement are you planning for anyway? Yours or theirs? Hey, somebody had to say it! Yes, your advisor should act as a fiduciary and always do what is in your best interest, but we all know that doesn’t happen all the time. Thus, you must be your own advocate. Ask questions and when the answers don’t add up look for a better alternative. New financial products are being released all the time. The financial services industry is no different than a cell phone manufacturer. If they are not constantly improving their products and lowering their fees, they will get priced right out of the market. So stop settling for old, expensive products. Your money must work as hard as you do if not harder!