INTRODUCTION
Welcome to Cortburg Speaks Retirement
An audio podcast about investing in the stock market, financial planning, money management and retirement planning. Each Wednesday, we help investors at all stages of life learn how to potentially grow and preserve their money from first job through retirement.
Now here is your host, Miguel Gonzalez.
HOST
Good morning and welcome to the CORTBURG SPEAKS RETIREMENT audio podcast.
On this week’s audio podcast, I explain how to factor inflation into your retirement as your retirement portfolio might be up, but inflation is crushing your returns.
On August 11th, 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 a Paper Route
I learned that lesson early from my newspaper route when I was 10 years old, delivering the Patriot Ledger in Massachusetts. I had a Schwinn Stingray bike, with baseball cards in the spokes. Because I delivered every day without fail, the kickstand wore out. So my pedal constantly hit the stand. You heard me coming halfway up the block.
On Fridays, I collected the week’s newspaper payment from the customers on my route. The weekly delivery cost was 90 cents, and several of my customers gave me a dollar, which meant a 10-cent tip. This was the 1970s, an era of rapid inflation. The newspaper then announced an increase in the delivery cost to $1. And I didn’t think much of it.
The next Friday, I arrived at my first stop, the home of a friendly elderly woman. Her expression was pained as I approached the door. She said she knew about the price increase, but she could not give me anything more than the $1. 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 that night, telling her I never wanted to be in that position when I was older. 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 should consider addressing 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 prepare for the insidious damage done by regularly increasing costs over the decades.
On behalf of your 85-year-old self, plan ahead to establish lifestyle-sustaining income. A financial advisor at Cortburg Retirement Advisors can help.
Make sure to visit our website, www.CortburgRetirement.com. Our site is filled with educational videos, eBooks, publications, and financial calculators designed to help you learn more about your finances. As you search our site, send us a note regarding any questions you may have about any particular investment concepts or products. We will get back to you quickly with a thoughtful answer.
This is Miguel Gonzalez, Certified Retirement Counselor (CRC) and Managing Partner, with Cortburg Retirement Advisors signing off for this week’s educational podcast.
DISCLOSURES
Opinions expressed are subject to change without notice and are not intended as investment advice or a solicitation for the purchase or sale of any security. Please consult your financial professional before making any investment decision.
All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
CRC conferred by The International Foundation for Retirement Education.
Securities offered through LPL Financial. Member FINRA/SIPC. Investment advice offered through Private Advisor Group, LLC, a registered investment advisor.
Private Advisor Group, LLC and Cortburg Retirement Advisors, Inc. are separate entities from LPL Financial.
Investing involves risk including possible loss of principal.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by FMeX.