Originally published at: https://peakprosperity.com/inflation-whats-your-number/
For the past 17 years, I’ve been running all over the place educating and warning everyone I could about inflation. Inflation is 100% the product of official policy. Heck, the Fed even has a minimum target for inflation, although they’ve never explained to anyone why they have any target at all let alone the specific rate of 2%.
Over the past 5 years, cumulative inflation is an eye-watering (because we’re all crying) 26.4%, which means if you were earning $100k in 2020 and are still earning $100k, you’ve experienced a $26,400 pay cut. Looked at another way, your taxes went by $26,400 because inflation is, indeed a tax. It operates exactly and precisely the same way as a tax.
In a proper tax regime, the government tells you how much it’s going to take, it takes it, and then spends it. In the illegitimate, and thoroughly immoral inflation-as-a-tacx regime, the government spends the money first, and then you pay for it with your money losing value.
Either way, it’s the same process; the government wants the money you earned by working hard for its own purposes and it takes it without you having any real say in the matter.
To book your free, no-obligation portfolio review and retirement planning session with Paul and his team, click here, fill out the simple form, and within 48 business hours, someone from Paul’s team will contact you to schedule a meeting.
For a variety of reasons ranging from Social Security COLA hikes to embarrassment at doing such a poor job, the government is incentivized to lie about the true rate of inflation. Each month is a new whopper from the BLS who supposedly tracks these things. These whoppers are wrapped up by the media and presented to us out here in the real world as if they were Gospel.
But anyone with any real-world experience at all can tell you immediately that the BLS lies are approaching some sort of escape velocity. Really? Groceries are up 1.8% over the past year?
Restaurants are up 3.6%? I need to bring this table down to our local eatery and ask them why fish and chips for two with a non-alcoholic drink is $70 when last year it was $45.
Or how about ‘medical care’ being up 3.4% when everybody’s health insurance premiums went up by double digits percentages while their deductibles wormed their way higher too?
Obviously, these are BLS fictions.
So mock them as we might, we still have to live out here in the real world and plan and save so that we can sail through retirement without inadvertently ending up as a Walmart Greeter for the last ten years of our life.
The math is dispiriting. If inflation averages 5%, as it has for the past 5 years things get wonky quickly. Let’s imagine someone has decided to retire at the age of 62, and that they need $100,000 of after-tax money to live on. Without inflation this calculation is easy; each year they need $100,000. With 5% inflation after just ten years, by the age of 72, to maintain the same living standard they will need $155,132.00 per year. Ouch!
By the age of 82, their savings and/or portfolio will need to be tapped for a cool $252,695 per year – just to have the same living standard as they had at 62!
This is why inflation is a stone-cold retirement killer. Most people don’t plan for the inflation they will actually experience. Compounding can work for or against you. Inflation is compounding working against you. It is the negative force that fights against your investment gains.
Editorially, all “gains” should be inflation-adjusted, because, if not, the government is double taxing the same money twice. First, there’s the inflation tax which has eaten away at our savings and investment’s purchasing power. Second, are the capital gains taxes when we sell the investments. The part of the increase in the dollar amount of our assets which was due to inflation represents government taking and spending that has already happened. After deducting the inflation portion, the remainder represents legitimate capital gains. This should apply to real estate, stocks, bitcoin, and bonds. For the government to double-tax its citizens is both immoral and unfair, especially since inflation stems from political weakness and policy failures.
My prediction is that inflation is headed higher, not lower, over the coming years. This is predicated upon this chart of locked-in government deficits:
Every red bar represents more inflation.
Coupled to that chart is my certainty that the Fed will print, and then print more because they lack any sense of obligation to the future and roll over every time Wall Street throws one of its patented hissy fits.
What level of inflation can your retirement savings survive? Do you know? Tune in to find out…
Peak Prosperity endorses and promotes Kiker Wealth Management’s financial services. To arrange a completely free, no-obligation discussion of your personal financial circumstances and goals with someone who speaks your language and thoroughly shares your outlook on the world, please click this link to go to Peak Financial Investing to begin the process.
FINANCIAL DISCLAIMER. PEAK PROSPERITY, LLC, AND PEAK FINANCIAL INVESTING ARE NOT ENGAGED IN RENDERING LEGAL, TAX, OR FINANCIAL ADVICE OR SERVICES VIA THIS WEBSITE. NEITHER PEAK PROSPERITY, LLC NOR PEAK FINANCIAL INVESTING ARE FINANCIAL PLANNERS, BROKERS, OR TAX ADVISORS. Their websites are intended only to assist you in your financial education. Your personal financial situation is unique, and any information and advice obtained through this website may not be appropriate for your situation. Accordingly, before making any final decisions or implementing any financial strategy, you should consider obtaining additional information and advice from your accountant or other financial advisers who are fully aware of your individual circumstances.
See you on the other side!
is a hugely important consideration, especially for those who are homesteading or with otherwise high levels of self-sufficiency.