What Investments Help Protect Me from Inflation?

Welcome to the last episode in the 4 part series on inflation in retirement. If you are just now joining in, consider heading over to the first episode in this series which covers what inflation is and how to measure it. The second installment discusses the ways that inflation impacts retirement and the previous episode helped you build a framework for combating inflation in your retirement plan. 

I create these deep-dive series as a way to sharpen my own skills as a financial advisor and to refresh my thinking on a topic. The order of the episodes allows me to think through a subject in an organized way. This is why I encourage you to listen to the series in order so that you can understand the progression of the subject at hand. Press play now if you have already listened to the preceding episodes so that you can learn the tactical ways to fight inflation in your retirement plan. 

Strategy vs. tactics

Before we dive into the tactical ways to fight inflation, it is important to understand the difference between strategy and tactics. A strategy is a framework for how you achieve a long-term goal. Tactics are the smaller steps that have a shorter time frame. Unlike strategy, tactics are easily started and discarded. They are a means to an end that complement and enhance the strategy. 

Your overall long-term goal is rocking retirement, and hopefully, after the last episode, you have begun to create your strategy to combat inflation so that you can rock retirement. Listen in to learn tactical measures that will enhance that strategy. 

The current tactical situation regarding inflation

We are all wondering where this inflation is taking us. Are we experiencing a monumental shift away from the low inflation and low-interest rates of the past 20 years? At this point, we can’t say for certain that inflation is here to stay, but we can analyze the current situation. 

In January, we experienced 7.5% inflation. If this trend continues, we will see rising interest rates as a result. Rising interest rates can lead to changes in the financial dynamics across the board. Bond and money market rates will rise, but on the flip side, the cost of borrowing money will rise as well. Rising inflation has a financial impact on every part of the economy and we will see a shift of capital across the world. 

It is important to understand that we don’t know for certain what will happen in the future. All we can do is educate ourselves and have a sound strategy in place.

Tactics to use if rising inflation becomes the new trend

If inflation continues to rise there are many ways that you can adjust your tactics in line with your overall retirement strategy. 

• Buy I bonds - These bonds adjust the amount of interest-based on inflation to preserve the purchasing power of the dollar over time
• Check out Treasury inflation-protected securities (TIPS)- TIPS are more like a traditional treasury bond. They adjust the principal balance of the bond based on an inflation factor to achieve the same goal. The price fluctuates based on interest rates and other factors.
• Hold money market funds - Hold more money market and cash assets. As interest rates rise you can lock in at higher interest rates. 
• Use more debt to buy things - take advantage of the current low-interest rates to purchase things that are likely to rise in price in the future
• Buy in bulk - Buy at today’s prices rather than tomorrow’s. 
• Change jobs - The labor market is tight right now and wages have not kept up. This means that companies are starting to bid up.
• Invest - Investing in real estate, companies with pricing power, and commodities have historically been a good idea during times of inflation.

Although there are many tactics you can use to fight inflation risk, it is important to do so with a sound strategy in place. Listen in to hear why you shouldn’t take extreme measures to tackle inflation.

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

PRACTICAL PLANNING SEGMENT

• [4:20] Coming next month…
• [6:30] Where to go if you can’t afford a full-time financial advisor
• [8:42] Strategy vs. tactics
• [12:38] What is the current tactical situation regarding inflation?
• [20:20] Tactics to use if rising inflation is the new trend
• [26:55] What I am doing tactically to fight inflation

COACH’S CORNER WITH KEVIN LYLES

• [35:05] How retirement calculators treat inflation
• [39:34] What else inflates in retirement?

TODAY’S SMART SPRINT SEGMENT

• [43:05] Define the guardrails for your tactics

Resources Mentioned In This Episode

Check out the Stacking Benjamins book tour–I’ll be at the Dallas event with Joe Saul-Sehy on March 1

Episode 417 with Joe Saul-Sehy

Rock Retirement Club

Roger’s YouTube Channel - Roger That

BOOK - Rock Retirement  by Roger Whitney

Work with Roger

Roger’s Retirement Learning Center