3 Ways to Inflation Proof Your Retirement

Peter, good to see you. I really like today's topic, three ways to inflation proof your retirement. I am so tired of talking about inflation, by the way. But of course, it is the most natural enemy of retirement savings. But there are strategies you can put into place to guard your nest egg from spiking consumer prices. And there may even they may even allow you to use those higher costs, your advantage advantage. So first, of course, investing in the long run, the U.S. stock market has tended to outpace inflation.

Yeah. And unfortunately, Aaron, I think we're going to continue talking about this for quite some time. In fact, the duration of forever and ever, inflation is going to continue to be a factor as long as they are creating and printing money, which usually is one of the bigger causes when that happens on a pace that is greater than normal. Investing is one of the critical components to help combat inflation. However, they usually don't happen at the same time, meaning in periods where we are seeing higher than normal inflation, the stock market usually doesn't react favorably during that time. In 2022, when we were seeing really inflation running rampant and everybody was starting to notice all of these significantly higher costs and prices, the stock market reaction was negative. We had one of the worst years in stock market history, specifically in fixed income bonds and bond funds on that side of the equation. Similarly, in the late 1970s and early 80s, we had a very kind of similar atmosphere for inflation and the stock market reaction. We had very high inflation. Of the market, we went into a pretty deep recession in the downward market for that period. So in summing that up, it is often a natural reaction for people during those high inflation periods where the market is volatile to say, hold up, I'm losing money, too.

I can't take this risk. I can't take the losses and then stop investing. We shouldn't do that because the market has not only always come back.

It has always. Surpassed previous highs over history. And so over time, not right in that exact moment, but over time, the market really has been the best financial vehicle to continue to grow our money above and beyond the average historic inflation rate. So it may seem like a double whammy right in the moment, but you got to keep your head down and continue to invest, especially dollar cost averaging.

If you are continuing to put money in, not only don't pull the money out, but continue putting money in because then you're buying on sale, you're buying cheaper prices. And those dollars are the ones that grow even more than the other dollars that had already been in in your investments in the first place. Next, of course, maximize your Social Security, which is easier said than done, though, Peter.

Yeah. And we've got to try to make the most of it. We have a Social Security software helps people analyze and optimize their Social Security. You know, the difference in one decision versus another over the course of a lifespan in retirement can be, especially in the case of like married couples, several hundreds of thousands of dollars in Social Security income alone. And those are dollars that are either going to come from Social Security or going to come from your personal investments, your assets, or simply not be there at all. Right.

And I know which one I would prefer. I would prefer to get them from what we're entitled from Social Security. We've put that money in. So try to make the most of that. Plus, Social Security does receive those cost of living adjustments, which is an important component, usually doesn't account for all of or offset all of inflation because Social Security usually is not all of somebody's income need. But those cost of living adjustments certainly are helpful. I'm glad you brought that up, because the COLA, of course, does reflect the current inflation rate. And Peter, I think a lot of people assume that, all right, well, the COLA just went up, so I should claim now.

So I take advantage of that. But that's a misconception. It is a very common misconception that, hey, if we're not in the Social Security collecting phase, that we miss out on the cost of living adjustment. Social Security is inflation adjusted across the board. And actually, what a lot of people don't realize is that the salaries that go into calculating the Social Security amount that you will receive are also inflation adjusted. Those earnings history numbers from way back in 1980 something that looks so small compared to what you're earning today, well, those numbers actually get inflation adjusted as they go into the equation for how much you will receive. So even some of those early earning years might account for a significant contribution to the Social Security you're going to receive eventually once you claim. And you do not miss out on the cost of living adjustment if you have not yet made the claiming decision. So don't hear about a larger than normal COLA and then rush out to claim and collect Social Security thinking you're going to miss out on that.

Your numbers will also, the future projected numbers for what you will receive will also be adjusted by that COLA amount plus any earnings that you are doing in those additional years of working. Yeah, glad we got to clarify that. And last, of course, rethink your expenses. Put simply, save more money, right? But this this may sound simple, but this advice, Peter, as you know, often requires the most coaching. Yeah, I mean, I hate telling people to not spend money or to continue working longer, but I also will never say that that's going to be bad.

Either one of those are going to be bad for your financial outlook on on life and retirement. So it's a balance because we have to live today. We have to enjoy today.

We got to do the things that we want to do, but we also want to continue to be able to do the things that we want to do for all the years of our life, every day into the future. And some of that at times can take some financial discipline, at least controlling our expenses. Right. Going to the grocery store is one of the most painful things for people these days because of the high cost of groceries. And we might not notice how expensive the alternative is going out to eat because it's just one meal. Right. We look at the cart of groceries and we're like three hundred and fifty four hundred dollars.

Oh, my goodness. But that covers a week's worth or more of meals for the family, whereas going out to eat once is one hundred one hundred and twenty dollars. But that's only that one meal. So, you know, maybe not going out to eat quite as much isn't really as fun, but but cooking together and preparing those meals in the house is time together. It's experience. It can be fun together and it can save a little bit of money. And it's not just the groceries.

Right. I'm just giving that as one example. But shopping insurance premiums on a pretty regular basis, anything where you are a long term customer, oftentimes, unfortunately, companies don't give the best prices to their existing customers.

I've never understood it. But if you go and shop around things periodically, oftentimes we can find savings even in the subsistence level line items of the necessary budget. And then, of course, one of the biggest expenses that we have is lifestyle, those things that are not obligations, but that we want to do. And sometimes we can find ways to cut some costs there as well. And certainly that is going to be an area that helps us to address this big factor of inflation, Erin.

Of course. Well, if somebody would like your help with any of those strategies, what's the best way to reach you? Give us a call at Rashaan planning nine one nine three zero zero five eight eight six nine one nine three zero zero five eight eight six. I'll wrap up, Erin, by saying that one of the best ways to combat inflation is to leverage each and every dollar in our retirement. Investment accounts to create as much income from them throughout retirement as possible. And because of these high interest rates, because of the same factors that we are continuing to have to talk about inflation involving, it is a great time to look at that. The cash flow rates, the payout rates, the income rates that you can generate from your savings are also significantly higher than they have been historically.

So if you want to look at the best way to fight inflation, it's get the most out of those retirement accounts. And now is a great time to look at that. Great. All right. Well, again, Peter, thanks so much for your time today. I appreciate it. Thank you, Erin.

Yeah. Give us a call. Rashaan planning nine one nine three zero zero five eight eight six. We always appreciate it, Erin.

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