Have You Factored Inflation Into Your Future?

Supply chain workers warn of ‘system collapse’………workers leaving in the middle of shifts…….over 150 ships were in port at Los Angeles-Long Beach during this past week, marking a new record according, and money is just about free. Just a few months ago, the U.S. Bureau of Labor Statistics reported that the Consumer Price Index increased 5.4% over the past 12 months. Shockingly, media outlets ran with absurd headlines like these: “Inflation is Not as Bad as Feared” and “Inflation Fears Moderate” and even this one: “Core Inflation Starts to Ease.”

Ok, maybe it’s technically true that inflation “only” rose 0.5% in July after rising 0.9% in June, but an increase of 0.5% every month is going to bring annual inflation north of 6%. Maybe this will hit home more: that 10% return on your portfolio is not 10% after inflation. Not even close. Maybe you don’t worry about some of the underlying data in the most recent inflation numbers?

Maybe it doesn’t bother you that over the past 12 months:

• Energy is up over 23%;
• Fuel oil is up over 39%; and
• Used cars and trucks are up over 41%.

Well, you should remember this: Inflation can do a number on retirees’ incomes. Most people don’t think about that, but with longer lifespans, we run a real risk of seeing our retirement savings eaten away. Curbing its impact takes planning.

Inflation Lessons From Mowing Yards

I learned that lesson early from mowing yards when I was 10 years old, working the homes of Lakewood. I had a Honda push mower, and a metal tank that holds 2 gallons of gas. Ride my bike to the gas station, fill’er up, and off to mow yards for the day.

On Fridays, Saturdays, and Sundays I would cut the grass and collect money from my clients. This was the late 1970s, and early 80’s, an era of rapid inflation. And then gas went above a buck. But at the time, I didn’t think much of it.

The next Friday, I arrived at my first stop, the home of a friendly elderly woman. I collected my earnings, and then subtracted my higher costs. She said she knew about the price increase on gas, but she could not give me anything more than the $10. She realized that there would be no tip for me. She informed me that the ever-increasing cost of everything was crushing her. She could not keep up with the inflation.

At several stops that Friday afternoon, I heard the same sad tale. I discussed the situation with my mom, and realized I would have to adjust due to higher costs. She gave me the motherly advice of “study hard, so you can make a good living.” Thanks mom.

What You Can Do About Inflation?

It’s actually quite simple: one must address the inflation issue early – when still a pre-retiree. Planning ahead and understanding the risks is paramount.

This issue is a big concern for today’s retirees. They will likely experience a longer retirement than any other generation ever. They need to guard against the insidious damage done by regularly increasing costs over the decades.

To simplify things, think of inflation in these terms. Every 17 years, money is cut in half. $100,000 in 2038 is $50,000

On behalf of your 85-year-old self, plan ahead to create lifestyle-sustaining income. Your advisor can help.

The Gardner Group helps manage the financial affairs of a select group of families. And fighting inflation with the right asset mix is part of our solution for our families.