Inflation and retirement are like oil and water, with rare exception, they NEVER go together. This video discusses how to inflation proof retirement using 10 simple techniques that have stood the test of time.
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Transcript:
For those that have been paying attention, 2021 has been a year of extraordinary inflation. In fact, inflation that hasn’t hit this way in over 40 years. By all accounts, we could have a 6% inflation number at the end of this year. And unfortunately for a lot of people, retirees in particular, when inflation hits, quality of life goes down. The reason that it impacts retirees more than others is because retirees don’t have a job as an offset with salary increases. So retirees or those contemplating retirement need to do everything they can to protect their downside. In this video, I’m going to cover off 10 ways to protect yourself against inflation. Stick around for point number 10, because that point is more important than points one through nine for most people. And to be candid, most people miss it. All right, let’s get into it. But before we do, please make sure you click subscribe and notifications so that you get alerted the next time I post a video. I post about twice a week.
Point number one: Lock in as many prices, as many costs as you possibly can. A lot of vendors will allow you to lock in costs with them if you in turn commit to a longer period of time. Many electric companies, for example, will allow you to lock in the price of electricity if you’re willing to commit to 18, 24, 36 months at that price. If you have one of the old-style mortgages that has both a fixed and a variable rate component, lock in the variable rate so that that doesn’t go up when interest rates rise. If it’s something that you can lock down that you have to purchase, then consider locking it in with a long-term agreement. Point number two: Avoid long-term bonds, corporate and treasury bonds in particular. If you lock in a 10-year return at a low interest rate, and right now interest rates are very, very low, and inflation hits, you’re going to lose money every single year.
If inflation is running 5% and you lock in 3%, you’re losing 2% a year. Point number three is buy rental income. Rental property, in particular, residential rental property, has two components that work very well in an inflationary environment. The first is that rents go up as inflation goes up, and the second is that if you lock in a mortgage, that stays fixed so the amount of money that you make continues to increase over time. If you don’t have the inclination to buy rental property yourself, consider buying shares in a real estate investment trust, or REIT, and let somebody else manage the property, and you just have the benefit of the rising yield that the REIT is receiving. Point number four is buy shares in companies that raise their prices based on inflation. These are companies like oil companies, consumer products companies, food companies, for example.
The easiest way to tell is that if you have a vendor who charges you more as inflation goes up, that same vendor might be a great place to invest your money. Point number five: Pay off your credit cards ASAP. The reason is that credit cards have a variable rate, and as inflation hits, the US government raises rates. When the US government raises rates, credit card rates go up too. Point six: Consider Treasury Inflation-Protected Securities. These are government securities that pay you an interest rate based on …
Disclaimer: this video is for educational and entertainment purposes only and is not meant to be a substitute for legal, accounting, tax, or professional advice. If you have any specific questions about any legal, accounting, tax or other professional service matter you should consult the appropriate professional services provider….(read more)
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Don't retire with debt. Try not to go into debt while retired. If debt while retired is necessary then pay it off quickly.
If you are going into credit card debt beyond what you can pay off in full every month then your emergency fund of cash is too small.
The downside of not holding cash and instead moving it into the market is what we've seen this year where the attempt to control inflation ends up bringing the market down. So yes 5% interest doesn't meet our current 8.6% inflation rate but the market is now WAY down in bear market territory losing tons of value is far worse than making 5%. Maybe now taking some of the cash you held onto in 2021 can be used to eventually buy equities at rock bottom prices.
Great content! I appreciate the way you tackle these different tactics. Soon-to-be retirees have always had to plan for inflation, but few actually understand how to account for it in their financial plans. The only good thing about the current punishing inflation here in 2022 is that it has brought the topic of inflation itself to the public consciousness. Now my clients are bringing inflation up to me instead of the other way around!
Thank you for this helpful information!
Where can I put cash that I’m not losing it? I’ve lost thousands of dollars in my retirement accounts this year 2022, so putting more money into them is pretty scary.
Any advice is greatly appreciated!! Thank you
Amazing video, A friend of mine referred me to a financial adviser sometime ago and we got talking about investment and money. I started investing with $120k and in the first 2 months , my portfolio was reading $274,800. Crazy right!, I decided to reinvest my profit and gets more interesting. For over a year we have been working together making consistent profit just bought my second home 2 weeks ago and care for my family.
I do wish you would explain #10 better. 'Other things' like items 1-9?
How much liquidity do you need in with inflation?
What about I bonds now?
Holding cash in this environment is important. Do not take money from your 401K when it is dropping like a rock. Let it stay. Use cash on hand instead. It is not a good idea to take money from your 401K when it is down. Wait till next year!
Are you saying to buy gold/silver?
Follow all these except I don't know where to put cash. 🙁
My best retirement strategy was to move to a low cost of living area….after 25 yrs of retirement …I retired at 50…I still have my retirement fund. I lived within my means. I own a home here and property taxes are $97 a year. Food prices and utilities are a third less than in the USA.
Another informative video. Thanks so much!
I was just thinking about my pension, and that what sounds good today as a monthly payment, will not be worth anything in 10 years. These other ideas help a lot, thank you.
NOW you sound like a C.P.A.
The price of TIPS goes down when interest rates go up. Ask me how I know. I don't own TIPS in this interest rate environment.
good
Watched another video that said 75% of retirees have debt equaling 24% of their income. Depending on single or double income this is a problem. Thanks for all that you do. Too many people can't say no to the spendies.
Good, thanks.
Physical Gold and silver as an insurance policy against hyperinflation. At least a years worth of freeze dried food, as well.
So were would you put your cash? Great video.
Thanks for your videos. I really appreciate them.
6%? That's a Lying govt false narrative. Remember they Always lie.
Always!! Go to the grocery store & you'll Easily see that the Real inflation rate is 17%, so Easily 3 times whatever the damn govt says.
Meaning? You have to find some investment that will profit you More Than 17% and that takes some digging, as Schmidt would Easily tell you. There are some astute investors who know where to easily surpass the Real inflation rate, so that you're Actually prospering. It just takes due diligence on your part. Vet them well and look at their track record over time. That's a good indicator & see too if they're open to investing in New technology that will be either a game changer or the only provider of a particular technology that Everyone and his brother will Have to come to to be able to do what they want to do.
There are many current videos about the pros/cons of I-Bonds, currently paying 7.12% interest. How about a video with your take on I-Bonds? Thanks
What about moving my savings to buy gold and silver?
Cash is oxygen, especially when you need it for unforeseen expenses. I’m not comfortable having less than six months living expenses and a cushion in cash at all times. I’m not taking SSA yet and will wait 3 more years for FRA. You never know what may hit you and borrowing money especially through credit cards is not a good strategy.
Your Federal welfare benefit, SS, will increase each year with inflation. No need to be concerned.
Holy Schmidt!! You did not mention the proven historical way to preserve wealth against inflation (money printing) !! That would be physical gold and silver. All the central banks in the world have been aggressively buying bullion for over a decade. The reason is they will reprice gold to erase most of their debt burden and start all over again, silly wabbit !!!
Item 10 is very simple and super easy to do!
Good points, but I am surprised delaying SS when possible didn't make the list. Or owning your home.
Rental Property? Lost me on that one bro…..