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Q. I hear a lot about inflation and I've read your articles about economics. But, what does this mean to someone who is preparing for retirement soon? What am I supposed to do? How do I counter a bad inflationary environment with my fixed pension?
Good question! Yes. We do write a lot about our debt-ridden nation and the threat of stagflation or hyperinflation to our huge, retiring baby-boomer generation. It is a real threat to the quality of life for millions worldwide.
Real Inflation Rate
John Williams who tracks "real" inflation numbers says we are running close to 11% inflation today - not the 2-3% inflation rate our government states in its CPI&PPI statistics. This will be devastating to most baby boomers unless we do something to counter it.
Here is what this means to those who plan to retire soon:
3,000 Monthy in 5, 10&15 Year
If you can currently live on a pension amount of $3,000 monthly, at an 8% inflation rate you will need $4,400 monthly in less than five years. In ten years you will need $6,477 monthly to match your current $3,000 monthly pension. In fifteen years at 8% inflation you will need $9,500 monthly to match that current $3,000 per month amount.
Retirement Plans Don't Factor in Two Things
Most retirement plans don't factor in two things: longevity and inflation. They recommend as we approach retirement age that we put around 60% of our assets in fixed assets (like bond funds), 25% in liquid funds (like money markets and CDs) and 15-25% in stocks. In normal times, like the past 30 years, this would be fine.
But, in times like today when inflation rates are soaring (or will be rising soon) it is not adequate to arrange a portfolio according to years past. We live in a time when our government fudges the CPI and PPI numbers among other statistics, when the entire nation is riddled with debt, and the value of our currency is plunging against other currencies.
Something Isn't Right
Most of us understand that something is terribly wrong. We are shocked by how quickly gasoline is going up each time we fill our gas tank. Every time we shop for food our groceries are going up $1-3 dollars for each item we buy.
If not that, we certainly notice that there is less ice cream in the carton, fewer tissues on a toilet paper roll, and less cereal in the boxes.
The electric companies keep raising our rates by 10-15% every few months. At least twice yearly our health insurance premiums are rising by a few hundred dollars. As a result we know that something isn't right. Property taxes are rising even if homes are plummeting in value.
What Can We Do?
So what can we do to prepare? We certainly can't do "nothing" or we will be living in poverty in just a few years. We are not financial advisors. But, here are a few suggestions - with some resources listed at the end of this article.
Jerry Robinson shows that savers who try to stay safe in treasury bills will fall behind quickly due to raging inflation. However, if investors had put 50% in T bills, and just 25% in gold and 25% in silver, they will have made a nice 59% return on their money the past few years. He suspects the next decade will have the same results. That is one suggestion.
With a fixed pension check each month, retirees might attempt to use spare change to accumulate silver dollars and change from a local coin shop. Make sure the merchant is well known in your community and has a good, ten-year reputation.
Investors might choose silver Eagle coins minted by the U.S. government, or small amounts of "junk" silver (pre 1967 dimes, quarters, and fifty-cent pieces). This is another suggestion to convert devalued dollars into rising assets.
Jim Puplava and Peter Schiff feel that savers must invest some of their funds in overseas high-dividend paying stocks - particularly in the gas and oil areas. According to them this method will help to hedge against the falling dollar and will provide growth in a portfolio as well.
If the falling euro is a concern, some investment in emerging markets may be warranted. But, be careful - markets and currencies are unstable and may continue to be so for some time yet.
Jim Puplava also suggests that retirees downsize in every way possible. This could involve relocation to places where taxes are less and home costs are not as prohibitive. Homes in California, for example, are still costly. Moving to another state might be prudent.
A Frugal Lifestyle
We suggest that retirees begin to focus their lives upon lasting values and not upon "creature-comforts" such as new furniture, fancy cars, and expensive clothing.
A New Way of Living
Think about moving to a trailer park if you must. Some are very nice. In fact, why not move to a trailer on a little land and grow your own garden to supplement store-bought items. Chickens? Goats? (This could be fun).
Get rid of junk. Don't buy new cars - buy used. Shop at garage sales and thrift shops. We don't need to run to the doctor every time we suffer an ache or pain. Put your energies in your local church and home bible studies - invest in people! These are the things that last.
Frugal is Scriptural
This kind of mind set is scriptural, by the way. The prophet Haggai chastised those who lived in paneled homes while they neglected their spiritual life. He said they would begin to see their economy as "purses with holes" (Haggai 1:4).
The prophet Isaiah gave a list of "woes" to those who add house to house and field to field (Isa. 5:8).
The Apostle James warned against those who get rich by exploiting others:
"Behold, the pay of the laborers who mowed your fields, and which has been withheld by you, cries out against you - and the outcry of those who did the harvesting has reached the ears of the Lord of Sabaoth" (James 5:4).
This aptly applies to globalist corporations who hire slave labor to make goodies for other nations. "Your gold and your silver have rusted - and their rust will be a witness against you and will consume your flesh like fire. It is in the last days that you have stored up your treasure!" (James 5:3).
Christians are not supposed to love the world or its riches (1 Jn. 2:15). We are not supposed to envy our neighbor's house (Deut. 5:21).
We are to be content with what we have (Heb. 13:5) and we are to be satisfied if we have food and clothing - period! (1 Tim. 6:8).
If we have extras we are to share with others (1 Tim. 6:18).
With this in mind, here are some books to explore at your library&some websites to peruse:
Brussee, Warren. 2005. The second great depression: Starting in 2007, ending 2020. Booklocker.com, Inc.
Puplava, Jim. www.financialsense.com
Robinson, Jerry. Christians&the collapsing dollar. (CD, tape, or DVD). Compass International, Inc. www.compass.org.
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