October 31, 2025 • 47 mins
Inflation eats into purchasing power—especially once pay raises stop. In this episode, Ken and Jeremy cover practical, level-headed ways retirees can plan for inflation without hype: from choosing where to keep cash, to timing Social Security, budgeting with intention, and setting the right mix of stocks versus safer assets.
We keep it simple, educational, and actionable so you can feel more confident about your retirement plan. If you’d like a personalized review or a second opinion, connect with our team at Retirement Planners of America.
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This podcast has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, personalized investment, financial, tax, or legal advice. RPOA does not provide tax or legal advice. You should consult your own tax and legal advisors before engaging in any transaction or strategy.
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SPEAKER_00 (00:00):
As you look at your retirement, as we see it, there
are three horsemen of theapocalypse.
Okay?
One of them is taxes, one ofthem is bear markets, which is
big drops in your investments,and the third is inflation.
So in today's episode, we'regoing to be talking about
strategies to beat inflation andto address the third of the
(00:23):
three horsemen of theapocalypse.
Hello and welcome to theRetirement Planners of America
podcast.
I am Ken Morafe.
I'm the founder and CEO ofRetirement Planners of America.
And uh we're a firm, as the nameimplies, that specializes in
(00:46):
retirement planning.
So today we're going to betalking about the third of the
three horsemen of theapocalypse, as we call them, the
three worst enemies you have toyour financial well-being.
But before I get going, let mejust tell you that uh we work
with over 6,500 beautiful,wonderful families across the
country.
And uh our goal is to have youenjoy your second childhood
(01:08):
without parental supervision.
That's our goal.
And in fighting inflation iscertainly an important part of
that.
Uh with me I have Jeremy, my uhco-host.
SPEAKER_03 (01:19):
Indeed.
SPEAKER_00 (01:20):
And I'm gonna hand the baton off to you, Jeremy, so
you take over here and lead usto the four powerful strategies.
SPEAKER_01 (01:27):
Absolutely.
Um inflation is is one of thosemonster words you hear a lot in
uh financial news.
Um pretty much all the time.
It's kind of one of those thingsthat's always in the back of
everyone's head.
Um when it's really low, um,people still whisper about it.
They're like, is it going back?
Oh no, where is it?
(01:48):
Uh and it inevitably rears itsugly head eventually.
Um what is inflation?
What's what's what's its whatmakes inflation, what does it
do?
SPEAKER_00 (02:01):
Well, you know, I'm I'm gonna kind of give you a
view of inflation that maybe youhaven't thought of in the in
this way.
Okay um inflation essentially iswhen a country becomes uh
poorer.
Okay.
So just to give you an example,let's say that food costs$300,
(02:28):
and you could afford it.
And now it costs five hundreddollars, and now you can't
afford it.
The food didn't change, it'sstill food.
Right.
It's just that you've becomepoorer.
You now can no longer afford it.
So inflation is kind of reversedto the way you may normally
think of it, that prices wentup.
It's actually a country becomingpoorer and not not being able to
(02:53):
afford the things that it couldbefore.
If you compare the U.S., youknow, and and with all the
inflation we've had, we'veexperienced our country becoming
poorer because of it.
But there are many places, youknow, that can't afford the
things that we can, right?
A cell phone, for example.
There are places where only richpeople have cell phones.
So that country is very, verypoor, even compared to us,
(03:15):
right?
And it it's so that that'sreally the way I look at
inflation is uh it's a veryterrible thing.
It's a it's a it's a cancer, iswhat it is.
SPEAKER_01 (03:25):
Yeah.
Yeah.
Only in relation to that dollarthat you have.
SPEAKER_00 (03:34):
Yes.
SPEAKER_01 (03:35):
Yeah.
SPEAKER_00 (03:36):
Yeah.
And uh, you know, uh what causesinflation is unfortunately, you
know, it it it it usually unlessthere's an exogenous event, you
know, like in with COVID, we hadthe supply lines were shut down,
right?
And so the supply of, you know,whatever it is that we wanted to
(03:58):
buy was cut off.
And so what few remaining onesthere were, everybody wanted had
to pay more for.
So scarcity causes prices to goup, and that could be
inflationary.
Um but those exogenous eventstend to take care of themselves
over time, just as you know,with the uh supply chains, there
it's not as uh big of a problemanymore.
(04:19):
Um But generally speaking,inflation is caused by too much
money chasing after a limited ora smaller supply of goods and
services.
And historically, what hascaused inflation is is
governments.
Yeah.
Um bad policy.
(04:40):
And uh when when governmentsdecide uh, you know, to buy
votes, um, and when they decidethat you know it they can
dispense large amounts of money,right?
What happens then is there theythrow a bunch of money into the
economy, and now there's thismassive amount of money, but the
(05:00):
supply of goods and servicesdidn't change.
So you created an imbalancebetween the amount of money
people have to buy things andthe amount of things there are
available to buy.
And when you do that, you makethe price of those things go up.
Yeah.
So, you know, there's there's anold expression about the the the
road to hell is paved with goodintentions.
(05:21):
I'm not gonna ascribe topoliticians evil intent.
Right.
I'm just gonna say in theirdesire, you know, to help people
and to do things, if they getover exuberant with it and they
put too much money into thesystem, then you get inflation.
And uh in our view, if you lookback at how much money has been
put into our economy sinceCOVID, I mean, more than I think
(05:44):
every year, you know, the entirehistory of our entire country
leading up to that point, at amultiple.
Yeah.
And when you put that much moneyinto an economy, even an economy
our size, uh, it's going tocreate inflation.
So that's the thing to keep youreye on.
And uh, you know, I I don't knowwhen politicians will learn
(06:05):
fiscal responsibility uh andlearn to, you know, kind of
manage their exuberance with uhwith throwing money at stuff.
But anytime the government putstoo much money into the system,
again, too much money chasingafter too few goods and
services, that's the definitionof inflation.
SPEAKER_01 (06:23):
Yeah.
And you know, I'm reminded ofthe the extreme examples, um,
you know, Venezuela and thingslike that, where people are
paying for groceries with poundsof money.
They w they weigh their money onscales instead of by individual
bills.
They wheelbarrow it in.
And they have to do it that day.
You got paid, you get paid dailybecause if you got paid weekly,
(06:45):
that money that you're earningon Monday is worthless by
Friday.
SPEAKER_00 (06:51):
You know, I had a client a few years ago who was
in his eighties and he wastelling me about you know his
grandfather back in World War I.
And uh they were actually uh inin Germany, they were Germans.
And he said that his grandfatherworked at a manufacturing plant
and they had this big fencearound it, and he would get they
(07:11):
paid him in cash back then, youknow, didn't have direct
deposits so he would get hewould get his cash, his his pay,
and he would literally like themoment he got it would sprint to
the fence and hand it throughthe fence to his wife, yeah.
And she would literally likesprint to the grocery store to
buy food because it was the thefood was uh the price was going
(07:34):
up so fast.
Yeah.
And again, if you look backthen, what happened?
It was an oversupply of of moneyor an undersupply of goods and
services.
Yeah.
SPEAKER_01 (07:43):
Um so with uh viewing that through the lens of
retirement planning, how do youhow do you address inflation?
SPEAKER_00 (07:55):
You know, uh so uh inf as I said, inflation is uh
uh one of the three biggestthreats to your uh financial
well-being when you're retired.
When you're working, not somuch, because in theory, you
know, you're gonna get uhraises, you know, cost of living
adjustments, et cetera.
But when you're retired, uhSocial Security to a certain
(08:16):
degree will do that.
But generally speaking, youknow, from your investments, et
cetera, you need to manage thoseaccordingly uh to have a
component of your portfolio thataddresses uh inflation.
And so strategies that um uhhelp to address that are
important.
You know, I've talked inprevious uh podcasts about how
(08:39):
you have a uh a tool, uh uh atoolbox, and in your toolbox you
got lots of different tools,right?
Each one's designed to do adifferent job.
And so uh you you don't want tobe like screwing things in with
a hammer, right?
Right?
So in your toolbox, as you lookat how you're invested and the
strategies that you use, youneed to have a tool in there
(09:01):
that is designed to addressinflation.
You need to have a strategy toaddress inflation.
And uh that that has to be partof your retirement plan in our
view.
If you don't, you're you'reyou're missing you're missing a
very uh uh important threat.
Now uh over the years um uhwe've we've we've heard that
gold is supposed to be like thisbig inflation beater.
(09:26):
It's the thing you buy, youknow, to fight inflation with.
I'm sure everybody has seen youknow a million TV commercials
and everything else, you know,buy gold, buy gold, buy gold.
Um gold got the reputation ofbeing an inflation fighter back
in the 80s.
SPEAKER_03 (09:44):
Okay.
SPEAKER_00 (09:44):
So and and I'll preface this by saying that that
gold is not an inflationfighter.
Gold is a fear fighter.
When people get scared, theywant to buy gold.
Right?
They want to have a hard asset,you know, when they get scared.
And so that does sometimescoincide with inflationary
(10:05):
periods, but not always.
But the big one was in the early80s when we had, you know, the
highest inflation we've ever hadin our country, even higher than
what we've experienced lately.
And our economy was literally onits back.
You know, we had oil embargo, wehad inflation, I mean, uh
everything it was a it was agiant perfect storm of economic
(10:28):
bad stuff, and we were on ourback.
And the US economy was on theverge of becoming a a
second-tier economy.
I mean, uh that that's where wewere.
And people were so scared thatthey bought gold.
And so gold went up tremendouslyand did way better than
inflation.
Ergo, gold is an inflationfighter.
(10:49):
Oh, yeah.
But if you look at, you know,long-term trends, what you'll
find is that gold is not always,and in most cases actually, is
not a good inflation fighter.
It's a good fear fighter.
Right.
If people are scared.
Right.
And sometimes inflation causesfear, as in uh, you know, back
in the 80s.
But inflation doesn'tnecessarily always cause the
(11:11):
kind of panicky fear wherepeople feel like I need to put
all my money in gold bars.
SPEAKER_03 (11:16):
Yeah.
SPEAKER_00 (11:16):
But you know, the other thing I I I uh find kind
of a an interesting questionwith with the gold bars, um, is
okay, so inflation's gotten sohorrible that you know you're
you're you have all these goldbars.
Right.
And so, I mean, what what areyou gonna are you gonna go down
to the grocery store, you know,with your pen knife and you're
(11:37):
gonna scrape off some gold offof your gold bar?
I want to buy my groceries with,you know, five shavings of this
gold.
You know, and and it's it's kindof heavy, and you know, where
you have to where are you gonnastore it?
So uh I don't I don't know thatuh you know uh that gold uh is
the best way to invest, the beststrategy to use to fight
(11:57):
inflation with.
SPEAKER_01 (11:58):
Yeah, yeah.
That was that was always been myquestion.
Is uh number one, who decidedthat?
Who decided that gold was thisinflation beater?
Yeah, I'm guessing people thatown gold.
SPEAKER_00 (12:10):
Uh back in the early 80s, I mean, there was literally
uh, you know, a a cold sweatpanic uh with regard to where
our economy was and where wherewe were going to what was going
to happen.
And uh so that that extreme fearcaused people to buy uh gold and
gold skyrocketed.
Yeah.
(12:30):
And people attributed that toinflation.
Yeah, right.
You know, it's it inflation goesup, gold goes up.
No.
Yeah.
It's it's fear that that causespeople to buy gold.
Right.
SPEAKER_01 (12:41):
Yeah.
And and then then how do youexchange that?
Here's a gold coin, please.
Uh I'd like my yeah.
SPEAKER_00 (12:50):
Yeah, as a currency, I think uh, you know, cash
probably is uh when the zombiescome, you know, or or the pulse
from the sky or whatever, andthere's no money.
Uh I don't know that even goldbars are gonna work in that
scenario, but cash will.
SPEAKER_02 (13:04):
Yeah.
SPEAKER_00 (13:04):
You know, I I don't people won't take your credit
card because it won't work.
Right.
They might not take yourdigital, you know, on your
phone.
But uh cash, cash money wouldmake a comeback, in my view.
But anyway, we're getting intothe zombie apocalypse.
Let's talk retirement planning.
Yeah, okay, okay.
SPEAKER_01 (13:20):
So having a strategy is super important.
So let's let's talk a coupleabout a couple of those
strategies.
Um and the and the firststrategy that we want to the
first of four is high yieldsavings accounts.
SPEAKER_00 (13:33):
What is a high yield savings account?
Okay, so as the name implies,high yield.
Yield means like interest, youknow, and and and dividends,
which also mean interest.
Uh so uh uh whenever you hearthe word yield or dividends,
generally what you're talkingabout is um the interest rate
(13:54):
that this investment isgenerating for you.
Okay.
So a high yielding savingsaccount is a savings account
that pays a high interest rate.
SPEAKER_03 (14:03):
Okay.
SPEAKER_00 (14:04):
Um you have to be careful with those uh because
again, if if you're if you'relooking for this to be your
inflation fighter, then uh whenthe interest rate on that high
yield investment is higher thanthe inflation rate, it helps
you.
But if it's lower, then itdoesn't.
So you have to make sure you'redoing that.
(14:24):
But generally speaking, uh highyield savings accounts, what
happens is that when inflationstarts to heat up, the Federal
Reserve wants to, you know, taketake the economy, slow the
economy down, slow spendingdown, slow demand down, so that
when demand goes down, theprices will come down and fight
(14:45):
inflation, which we'veexperienced, you know, here over
the last uh uh little bit whereyou know the the Fed raised
interest rates dramatically.
Why they do that?
They want to drive down uhinflation.
So what happens when thathappens is that the high yield
savings account, usually about10 days, so when the Fed says
we're raising interest rates byhalf a point, half a percentage
(15:07):
point, uh usually within 10 daysthat high yield savings account
will go up commensurately.
Right.
So there's a little bit of alag, but generally speaking, it
it moves right along with whatthe Fed's doing.
So why does that become then aninflation fighting tool?
Well, because the interest rateyou're getting will rise as
inflation rises.
(15:28):
And for like an emergency fundor a place like that, you know,
that certainly could be a place.
SPEAKER_01 (15:33):
Right.
Um so I I have my money, Idecide, okay, here's one
strategy we're gonna put somemoney into this high yield
savings account.
What does it do when it'ssitting there?
Like, like how do how does thatactually work?
I I get we're taking it andwe're putting it here.
Who's taking that money?
Who's paying that out?
(15:54):
Who is you know, like really,like how does it how does that
actually work?
SPEAKER_00 (15:59):
Well, you know, it it it depends on what kind of a
high yield savings accountyou're using.
There you can you can uh thatthat high yield savings account,
the investment behind it couldbe government backed, right?
Which should generally itwouldn't pay you as high of an
interest rate, but if it is ahigh yielder and it's set and
it's tied to what inflationdoes, you know, it could help
(16:21):
you there.
Um there are non-governmentones, which generally are are uh
the the underlying investmentare corporate bonds and those
kind of things.
And in that scenario, there'sthere's more risk involved,
right, than the government, sothat's why you get a higher
interest rate.
So um yeah, you have to kind oflook at what the under that's a
(16:43):
very good question.
If if you're uh in thegovernment ones, then it's
backed by the full faith andcredit of the uh printing press
that they have in Washington.
Yeah, yeah.
Uh and and and uh if it's not,then it's the full faith and
credit of the companies that arebehind that.
And if they go under, then youknow, right, so does uh so does
everything else.
So uh yeah, that's a really goodquestion.
(17:06):
Ask where or or who is this, youknow, who is this invested in?
Yeah.
Uh what is it invested in, whoand who is paying the interest,
and uh what's the risk of theirsolvency?
Because you know, in in 2008, wesaw um a lot of uh high-yield
investments that were consideredsuper safe, right, that turned
(17:28):
out to be very high risk and andlost a lot of money.
SPEAKER_01 (17:31):
Yeah, and even recently there was a a certain
bank that uh had to have alifeline thrown to them uh by
the federal government.
And again, that's you know, ifthey didn't get that lifeline,
if you had money with them, itwas gone.
SPEAKER_00 (17:45):
Yeah.
You know, since I went throughit, I'll share with you a story
of uh what happened in 2008.
So uh money market accounts uhfunds, um at the time people
were looking for the highestinterest rate that they could
get in a money market fund.
And you always had the choice,you know, of a government
security backed one and a and acorporate bond kind of thing or
(18:06):
a real estate, you know, uhbacked uh uh investment.
And what happened with thosemoney market funds is that there
was a fear at the time that theywould actually go under or they
they at the you know or breakthe belt, uh break the buck, as
they call it, where you put adollar in, it's worth less than
a dollar, or worse, it couldlike go under.
SPEAKER_03 (18:26):
Right.
SPEAKER_00 (18:26):
And so there was this growing fear that I need to
get my money out of all thesemoney market funds.
And the problem with that isthat the money market funds are
the lifeblood of our economy.
It's what businesses andeverybody else uses to pay their
bills, you know.
And so it's kind of like ifeverybody, if there was a run on
the bank on the money marketfund, it's like you took the
(18:48):
blood out of out of the out ofthe bloodstream and the body's
gonna die.
SPEAKER_02 (18:52):
Yeah.
SPEAKER_00 (18:52):
So the Federal Reserve was like, okay, we gotta
we've got to stop this beforeyou know people panic and we
have a run.
And so they came out and theyactually said, we will guarantee
money market funds to anunlimited amount.
Oh, wow.
Unlimited.
It doesn't matter how much youhave in it.
You could have$500 million,we're gonna guarantee all of it.
(19:13):
And so because they said that,everybody calmed down and the
panic went away.
SPEAKER_03 (19:17):
Yeah.
SPEAKER_00 (19:17):
This was in uh, I think it was around 2009-ish or
so.
Well, then what happened waseverybody calmed down and the
panic went away, and the moneymarket funds uh, you know, the
confidence uh was regained.
Two years later, the governmentcame out and said, Okay, we're
not doing that again.
So what we're gonna tell youright now is yeah, they won't do
(19:38):
that again, we'll see.
But but we won't we're not doingthat again.
So going forward, if you're notin the government-backed one,
we're not covering you.
SPEAKER_03 (19:48):
Okay.
SPEAKER_00 (19:49):
Okay, and and so what happened was that there was
a giant uh sucking sound.
And the move a lot of moneysaid, okay, I'm I'm not going
there, and went into thegovernment-backed ones.
Yeah.
Um I suspect that over the yearspeople have forgotten that
lesson.
Right.
And are maybe betting that ifall heck breaks loose, the Fed
(20:10):
will step in again, and maybethey will.
Uh, but I think there's a lot ofmoney that is no longer in the
government-backed side, and it'sgone to the other side because
of the higher interest rates youcan get.
Right.
And people have short memories.
But maybe that little walk downmemory lane, a little historical
lesson will will tell you.
Trevor Burrus, Jr.
SPEAKER_01 (20:28):
Yeah, yeah.
For the for the governor thegovernment to guarantee money
that's not theirs necessarily.
That's uh I guess it reallyshows how much of a panic
everyone was in.
SPEAKER_00 (20:43):
Yeah, and at the time, you know, there were a lot
of conversations about what theycalled the moral hazard.
SPEAKER_01 (20:48):
Yeah.
SPEAKER_00 (20:48):
In other words, if you do it once, you know, are
you forgiving people for theirbad behavior?
Yeah.
And and therefore you set aprecedent.
Yeah.
And and maybe you should letpeople suffer the consequences
of their actions.
Right.
But the counter to that was,yeah, well, fine.
Let's watch the economy diewhile we're teaching people a
lesson on responsibility.
You know, it's kind of what agreat lesson.
(21:10):
It's like the economy died.
There.
We showed you.
Yeah, but you messed up and nowwait, what happened?
We're in depression 2.0,everybody's on food lines, but
man, we taught you a lessonabout where you should keep your
money.
So yeah, and and so I I hate tosay it, but I think probably if
we got to that point again, thethe Fed may step in.
(21:30):
Yeah.
But right now, they said, no,don't don't expect that again.
If you're not in the governmentbacked, we we're not gonna we're
not we won't back it.
SPEAKER_01 (21:39):
Right.
Okay.
Okay.
Fair enough, I guess.
Um okay.
So high yield savings accounts.
Um strategy number two, investin the stock market.
SPEAKER_00 (21:50):
Yeah.
Now we have four strategies,right?
SPEAKER_01 (21:53):
Yes.
SPEAKER_00 (21:53):
I actually want to save that one for last.
Can you can you skip that one?
SPEAKER_01 (21:56):
We can skip that one.
SPEAKER_00 (21:57):
Okay, because that one's really important.
Go to let's go to the others.
SPEAKER_01 (22:01):
Okay.
All right.
We'll call strategy number two,we'll call that four.
So we'll just we'll just changethe numbers here.
So real strategy number two isdelayed social security
benefits.
SPEAKER_00 (22:15):
Aaron over there, our producer is going crazy.
He's like, wait a second, youcan't flip the numbers on me.
So yeah, so delaying SocialSecurity benefits.
Yeah.
So what happens with SocialSecurity is that the longer you
delay starting, okay, you getincreases in the amount you're
(22:39):
going to get eventually.
Right.
Okay.
So for example, let's say thatyou you could start when you're
62, uh, but you choose to waituntil let's say your normal
retirement age is 67.
Right.
Okay.
So you're going to wait fiveyears before you start.
During those five years, theamount of your Social Security
will increase.
They they uh add a cost ofliving adjustment to it.
(23:00):
Uh they call it delayed credits.
The other thing that happens isthat if you wait from your
normal retirement age untilyou're 70, then you get the
delayed credits all the way foranother three years, right?
So uh delaying as long aspossible gets you the highest
payout because inflation isgonna increase the value of
(23:20):
those pays, of those payouts.
Um but once you reach age 70,they don't do it anymore.
It stops there.
So delaying starting SocialSecurity does have the benefit
of the you know the the paymentsyou're gonna get being higher
due to inflation, but once youreach 70, they don't increase it
(23:40):
anymore.
Yeah.
So there is no reason that I canthink of that you would want to
delay getting Social Securitybeyond the age of 70.
SPEAKER_02 (23:47):
Yeah.
SPEAKER_01 (23:49):
Um what would that mean if we think of that in
terms of compounding interest?
SPEAKER_00 (23:58):
Yeah, so you know, the delayed credits are not uh
compounded interest.
You know, like for example, whatwhat they say is that you're
gonna get an 8% increase eachyear on on the amount you're
gonna get paid uh if you wait.
That they're they're notinflating the value, uh it's not
it's not inflated, it's an eightpercent increase.
(24:19):
Um it's a it's it's it's it's uhit's confusing on how to explain
that, but it it but it isdifferent.
Yeah.
So don't assume that what itmeans is that you're getting an
8% increase every year on whatyou're gonna get, because it
isn't.
It's it's an 8% credit.
Um But regardless of that fact,the longer you wait, the higher
the amount you're gonna get.
And so therefore, if inflationis going up, you want the income
(24:42):
you're gonna get to be higher.
Right.
So delaying Social Security canbe a way of mitigating against
inflation.
But again, don't you know gopast age 70 because once you get
after that, there are no therethey don't increase anything
after that.
So if you go for till you're 80to start, then those 10 years
you didn't get you didn't getwhat you're you know, the the
(25:03):
payments you could have gotten.
And then number two, they're notpaying you more at age 80 than
70.
SPEAKER_01 (25:08):
Yeah, yeah.
And obviously everyone'ssituation is different and and
unique.
So that rule doesn't apply toeveryone all the time.
And so it's really important tohave somebody that knows uh your
situation, knows the rules andthe laws and that are changing
(25:28):
every year, keeps up to datewith it, and can make that very
personalized kind of plan foryou.
SPEAKER_00 (25:37):
Yeah.
That that's a very good point,and it's totally self-serving
given that's what we do.
So thank thank you for that one,Jeremy.
Of course, of course.
Um But yes, you know, SocialSecurity, uh as I've said many
times, if there was an Olympicsuh for um complexity, Social
Security would win the goldmedal every time.
There's over 9,000 combinationsof when and how to take Social
(25:59):
Security.
So it's it's it's not just aninflation question when it comes
to Social Security, althoughthat is part of it.
Uh it's also when and how.
Uh but yeah, um talking withsomebody that is versed and
trained and certified in SocialSecurity, I think, is is very
important.
And with all of our retirementplanners in our firm, uh we
(26:20):
require them to go through ourtraining and our certification
uh so that we can feel confidentthat when they're talking to
clients and prospective clientsthat that they uh know what
they're talking about.
SPEAKER_01 (26:32):
Absolutely.
Absolutely.
Okay, so delaying SocialSecurity benefits could be a way
to mitigate the effects and tobeat inflation.
Um Strategy number three,reassess your budget and
spending.
SPEAKER_00 (26:51):
Yeah.
Um so again, going back to otherthings we've talked about in
other uh podcasts that we'vehad, we always want to start
with what we call an RCFP, aretirement cash flow plan.
The retirement cash flow planhelps us to look into the future
and make assumptions as towhat's going to happen with your
(27:14):
cost of living.
You know, how how much inflationshould we apply to it, and how
does that affect the ability ofyour money to support the
lifestyle that you want.
So when it comes to looking atthat, we want to look at your
financial health.
Uh it's kind of like a doctor,you know, where you go in and
they uh they take your bloodpressure and they take your
cholesterol and they do allthose kind of things.
(27:36):
And basically you want to keepmonitoring those things over
time, right?
Right, to make sure that you'renot headed in the wrong
direction, or if you are alreadyin the wrong direction, that
you're headed back into the gooddirection.
And so it's the same thing withthe retirement cash flow plan.
We want to look at yourfinancial health and take into
account, unfortunately, I think,a a cancer that is in your
(27:57):
investments and is in yourfinancial life, which is uh
inflation.
SPEAKER_03 (28:00):
Yeah.
SPEAKER_00 (28:01):
And so is it getting out of hand, you know, and do we
need to do something about it?
So and and and the importantthing is to not look at it on a
one-year basis, but but projectit out.
Yes.
You know, obviously projectionsare never going to happen
exactly as you planned.
Right.
But you want to project out, andwhat we do is we look at a uh
(28:21):
what we call a semi-worst casescenario.
Okay, so we want to overestimateon bad stuff and underestimate
on good stuff, so we create a auh a conservative, if you will,
um, you know, scenario goingforward, looking into the
future.
And if you're okay with that,then you'll be okay under
something better.
Yes.
But by doing that, by looking atthat cash flow and projecting it
(28:43):
out over the years, now what youhave is a picture of how is
inflation going to impact me andwhat changes can I make now that
over time, because you know, thecompounding value of money is
all about time.
Right.
And the longer time you have toaddress inflation and to make
small changes today, the they'llcompound over time as opposed to
(29:06):
waiting until the last minute,and then all of a sudden it's
like, oh my gosh, I gotta likecut my cost of living in half
because I can't afford itanymore.
Right.
And uh that can get problematic.
So planning, looking into thefuture, building your uh cash
flow plan, taking into accountinflation, uh, and looking five,
ten, fifteen years, knowing fullwell it's not gonna happen
(29:26):
exactly like that.
Sure.
But at least giving it aconservative view so that you
have a high confidence that it'sgonna be better than that if it
does happen.
SPEAKER_01 (29:34):
Yeah.
Talking about budget andspending, because inflation's
not going to uh increase theamount you have coming in
usually to uh as much of adegree as it's gonna affect how
much you're spending um whatwhat's going out, because
inflation is gonna affect thecost of pretty much everything
that you're touching.
Um what is a cost that you'veseen that really adds up over
(30:01):
the years?
Maybe it looks small in thebeginning, talk about that
compounding effect.
What's something that lookssmall in the beginning, and then
you look five or ten years laterand you say, wow, that added up
so fast?
Where did that come from?
SPEAKER_00 (30:14):
Um Well, I'm I'm laughing because the answer to
your question is travel.
The reality is that you know umdifferent things are more
important to your budget thanothers.
You know, so depending on yourfinancial situation, uh food and
(30:37):
gas may not be as large apercentage of your cost of
living that it may be forsomebody else.
And so um in many cases with ourclients, you know, yes, their
cost of food is going up andtheir cost of uh you know, those
kind of things, their utilitiesand all that are going up, but
as a percentage of their totalcost of living, you know, those
(30:58):
things are not a very big deal.
Um many of them have mortgagesthat we want to get paid, pardon
me, that we want to get paidoff, but mortgages, the payments
generally stay the same.
Right.
So they're not subject toinflation.
So really it's uh the biggestthings I would say are the cost
of having fun.
(31:18):
You know, it goes up.
Yeah.
And since that's an importantpart when you're retired, you
want to have fun.
Absolutely and the cost of stuffgoes up.
Have you seen the price of golfballs lately?
No, I haven't.
Oh my gosh, it's ridiculous.
Have you seen the price of likea cup of coffee at at a at a at
a it's it's like you know, thethe things that were like your
little your little luxuries, youknow, all of a sudden it's like,
holy cow.
Yeah.
(31:39):
Right?
So that's that's that.
Um so yeah, you ha you have touh the interesting thing is that
a lot of the fun things are theones that uh that that go up the
most for once you're retired.
SPEAKER_01 (31:52):
Yeah.
Well, uh speaking of the priceof golf balls going up, the the
prices really stays about thesame for me because I usually
just go out into the the waterhazards and just scoop up
whatever I can.
Because I usually end up puttingthem back in there, so I'm
reusing them all the time.
As long as you put back as muchas you take out and you feel
good about it.
Yeah, yeah, that's exactly it.
(32:14):
It doesn't affect that.
Oh man.
Okay.
Uh so moving on.
So recessing your budget andspending.
The last one.
SPEAKER_00 (32:24):
Yeah, and and before we leave that, you know, one of
the things that we do from thestandpoint of looking at your
financial health is, you know,there is an assessment that you
need to do um, you know, pr atleast once a year where you look
at what what is your cost ofliving, how much are you
spending, and is that stillappropriate?
Yeah.
And so that is an exercise thatis a valuable one and needs to
(32:47):
be done.
Um, you know, in a lot of cases,it's it's not a bad thing.
You know, sometimes uh whathappens is that you could spend
more.
SPEAKER_03 (32:55):
Yeah.
SPEAKER_00 (32:55):
You know, and and one of the things that I tell
all of our retirement plannersis that, you know, uh our
clients for the most part arevery uh they they've they've put
a lot of money aside, you know,they've been very diligent,
they've been, you know,investing and all that, and
their nest egg is is kind oflike you're not allowed to touch
that.
SPEAKER_02 (33:14):
Yeah, right.
SPEAKER_00 (33:15):
You know, it's like that's scary.
That's like you put it over hereand you are not allowed to touch
that.
Now you retire and you gottatouch it, right?
You gotta start taking moneyout.
It's like you spent your wholelife thinking I must never touch
that.
You know, it's like I will doanything that I need to, you
know, without ever touchingthat.
Right.
And now you're taking it.
And uh so you know, as uh as youlook at that, um, one of the
(33:39):
things that I I tell retirementplanners is you need to give uh
clients permission to spendtheir own money.
Right.
A lot of times they come in andthey're like, oh my gosh,
inflation is taking off and allthis stuff, you know, and I'm
gonna be poor and I can't handlethis.
And so you you do the retirementcash flow plan with them and you
show them where they are.
And if they're you know in thefortunate group, well, guess
(34:00):
what?
Yeah, you can actually spendmore.
Yeah, yeah.
You know, in in spite of that.
Others, yeah, you need to cutback.
Right.
But that's that's what we do,that's our job.
SPEAKER_01 (34:09):
Yeah.
Again, we keep going to thisover and over again.
Know where you're at and knowwhere you're going.
Right.
Super important.
It's super important to havethat, and to have somebody that
isn't as um emotionally involvedor connected to that money, you
know.
You know, we're we're we'reemotionally connected to our
clients, obviously, but not tothe degree that a client is
(34:32):
connected to their nest egg.
SPEAKER_00 (34:34):
Yeah, yeah.
I agree with that entirely.
I think it it's kind of like uh,you know, if I was a a surgeon
and I had to perform surgery onmy wife, yeah, that I I you
know, I I wouldn't even want todo that.
Yeah.
You know, I'd be too emotionallyinvolved.
And so, and in particular, and Iwouldn't want to do it on myself
either.
Right, right.
Then then that would really bedifficult.
So, yeah, doing this yourself,uh, you have greed, you have uh
(34:58):
fear, you know, you got allkinds of emotions that are
coming into play.
Um, so yeah, I I think workingwith a professional is
important.
Absolutely.
SPEAKER_01 (35:07):
Okay, anything else?
Yeah, so we got to get to numberfour.
Number four.
Yeah.
Formerly number two, now numberfour.
Did you get that, Aaron?
Uh investing again, again,strategies to beat inflation.
Yeah.
Um, investing in the stockmarket.
SPEAKER_00 (35:25):
Yeah.
Okay.
So before I was talking about,you know, gold um, in our view,
is not the best inflationfighter.
Right.
It's had its moments, but again,we think of it as a fear fighter
as opposed to an inflationfighter.
So, what is the best investmentto fight inflation with?
The answer, thanks for thespoiler there, Jeremy, is uh is
(35:48):
stocks.
Yeah.
The stock market historicallyhas been the best inflation
fighter that you can use.
Um again, not always, but forthe most part.
And here's why.
When when a company, let's saythat they sell something um for
$100, and when they sell it for$100, they make$5 profit.
(36:12):
Okay, so they have a 5% margin.
SPEAKER_03 (36:13):
Okay.
SPEAKER_00 (36:14):
So they make a 5% profit, and what happens next is
that the cost of whateverthey're selling goes to$110.
It went up by 10%.
So normally what they do is theypass that along, and they still
want to get, you know, their 5%margin.
So now the mar the$5 went to$5.50.
It went up by by uh 10% also.
SPEAKER_03 (36:35):
Right.
SPEAKER_00 (36:35):
So what happens is that in in most cases, uh
companies are valued based ontheir earnings.
SPEAKER_03 (36:42):
Yes.
SPEAKER_00 (36:43):
Right?
So their profits.
Right.
So if their profit just went up,their stock price went up as
well.
SPEAKER_03 (36:48):
Right.
SPEAKER_00 (36:48):
So essentially what happens is inflation is
inflating the stock market atthe same time.
Yeah.
So because of that, the stockmarket is actually one of the
most, here's a word for you,efficacious.
You like that word?
Oh, I do.
I do like that word.
SPEAKER_04 (37:03):
Yeah, yeah.
SPEAKER_00 (37:06):
It's one of the most efficacious tools to use to
fight inflation.
It's the one we use.
So having said that, Jeremy, ifinflation is the best tool to
fight inflation with, I'm sorry,if the stock market is the best
tool to fight inflation with,then we should just sell
everything and put it all in thestock market.
SPEAKER_01 (37:24):
Makes sense to me.
Yeah.
SPEAKER_00 (37:25):
Yeah.
Why wouldn't we?
SPEAKER_01 (37:26):
You were supposed to say no, we would never do that.
I mean, absolutely do not dothat.
Ken, what do you think?
SPEAKER_00 (37:34):
Well, because if if if in fact putting all your
money in the stock market is thebest way to fight inflation,
that's what you're worriedabout, then here's what I
suggest.
Everybody listening to this,watching this, uh I want you to
uh turn all your i it's theequivalent of uh of going to Las
Vegas and betting it all onblack.
SPEAKER_01 (37:53):
You're saying that's not a good idea.
SPEAKER_00 (37:55):
Aaron Ross Powell Well, if if it was, then
everybody listening andwatching, then what I want you
to do is sell everything yougot, uh-huh.
Okay, turn it all into cash,uh-huh, and we'll meet out
front.
We'll have a bus and we'll allget on the bus with our suitcase
full of cash, we'll go down toLas Vegas and we'll bet it all
on black.
SPEAKER_03 (38:10):
Okay.
SPEAKER_00 (38:10):
And if it hits, we're gonna be really, really
rich.
Absolutely.
But if it doesn't, then wewon't.
Oh.
Right?
That wouldn't be.
That wouldn't be a good outcome.
SPEAKER_02 (38:19):
No.
SPEAKER_00 (38:19):
So putting you so so determining how much stock
market you should have uh, youknow, in your portfolio, because
it's risk, right?
Stock market is not as uh assafe as, for example, the CD
down at the bank uh from acapital loss standpoint.
Right.
So determining how much stockyou should have in your
portfolio, how how important isthat tool in your toolbox to
(38:42):
you, is determined once again byhow much risk you need to take
to accomplish supporting thelifestyle that you want.
SPEAKER_02 (38:49):
Yeah.
SPEAKER_00 (38:49):
Okay, so for example, if we can if we can
satisfy giving you the incomeyou need for the rest of your
life, uh, you know, subject toinflation and all the rest of
it, with a 4% return.
Well, that would dictate adifferent level of stock market
in your portfolio than if theanswer was 6% or 8%.
Yeah.
Hopefully it's not 8%.
(39:10):
But if it was 8%, you can't dothat by putting it all in CDs or
whatever.
Right.
Right?
Or in bonds or or you you haveto get more aggressive, go more
stock to be able to get that.
So the amount of risk that isnecessary to accomplish your
goals uh helps to determine howmuch stock market you should
have in your portfolio.
Yeah.
And you know, as we always say,we want to take the least amount
(39:31):
of risk necessary to accomplishyour financial goals.
So when we create thatretirement cash flow plan, that
helps us to determine how muchrisk you need to take.
And once we know that, then wecan construct the portfolio with
what we would think is theappropriate amount of stock
market for you.
SPEAKER_01 (39:47):
And and stock market is a very broad term.
SPEAKER_00 (39:50):
Yeah, when I when I yeah, that's true.
SPEAKER_01 (39:52):
Yeah.
And here we're we're we'retalking mainly about the S P
500.
SPEAKER_00 (39:57):
Well, I'm talking about equities.
Yeah.
Um, and so it it would includethe S P 500 index is the is 500
very large companies, but itwould also include smaller
companies and mid-cap companies.
Yeah.
But the percentage, I'll call itequities, that's another word
for stocks.
Okay.
The percentage of your portfoliothat uh is uh that should be in
in uh uh in equities, uh in ourview is determined by how much
(40:21):
risk you need to take.
And how much risk you need totake is determined by your
retirement cash flow plan thatdetermines what how much you
need to cover for inflation.
SPEAKER_01 (40:30):
How do you decide what to invest in inside of that
percentage of the stock marketinvestments?
SPEAKER_00 (40:38):
So uh one of the things that we want to there
there's a um a term called theefficient frontier.
And the efficient frontierbasically looks at how much
risk, how much return are yougetting for a given level of
risk.
And so diversification isintended to give you the highest
(41:00):
return for the least amount ofrisk.
So it is not the highest return.
Correct.
Because the highest return wouldbe the highest return with the
most amount of risk.
SPEAKER_03 (41:08):
Absolutely.
SPEAKER_00 (41:08):
But it also could come with the biggest loss.
So when you're constructing aportfolio, what you want to do
is have a mix and match ofthings in there that gives you
the highest return against therisk.
So you're trying to balance thetwo, and you want to come up
with the efficient, it's calledan efficient frontier.
(41:30):
And uh this is something thathas been, you know, Nobel Prize
laureates have built for us, uh,you know, have done a lot of the
economists have done a lot ofwork on that.
And they're still doing it, ofcourse.
There's always room forimprovement, but uh we use you
know eco uh economic models tohelp determine how much of it's
it's kind of like uh you know arecipe for for uh your apple
(41:50):
pie.
You know, how much salt shouldyou have, how much sugar should
you have, you know, how how youknow all the stuff that goes
into that.
SPEAKER_01 (41:57):
Right.
Yeah.
Because you know, if we'retalking about the SP 500, that's
500 companies.
I uh would uh venture a guessthat the companies that they do
business in, the categories orthe business types is pretty
broad.
Yeah, it is.
Um and so they're gonna beaffected by everything that's
(42:17):
happening on in the world verydifferently.
SPEAKER_00 (42:20):
Yeah, those companies are all global scale
companies.
So yeah, they're they're um youknow, they're investing
overseas.
They maybe even have plants oremployees overseas, and so
they're global in most cases.
Um smaller companies may besomething that you're want to s
smaller companies are kind oflike Tabasco sauce, you know.
A little Tabasco sauce on yourpizza is okay, but emptying the
(42:42):
whole bottle in there, not sogood.
So uh, you know, small caps uhadd a little spice and they can
do very, very well in properenvironments, mid-caps same.
So they tend to zig while theother one zags.
Right.
And so again, a diversifiedportfolio is one that you're
trying to you're trying to hitthat efficient frontier.
It's it's there's no you nobodyactually hits it exactly.
It's a it's a moving target.
(43:03):
But the idea is to get as closeto it as possible.
Yeah.
So again, what you're doing isyou're taking uh you know only
as much risk as is necessary toaccomplish your financial goals,
and since we're talking aboutinflation today, to to
compensate for the effects ofinflation.
SPEAKER_01 (43:17):
Yeah.
That's th those are very umin-depth strategies that uh are
not very simple.
Um I don't think I want to beable to uh go home and uh figure
that out myself.
Um is there anything we're we'remissing out of these strategies?
SPEAKER_00 (43:36):
Um Well, I think uh strategies themselves, I don't
think that there's I I thinkwe've covered it nicely.
Uh but I think what you said isalso part, I think it should be
part of your strategy uh andthat is to work with a
professional.
Um there are many studies thatshow that if you're working with
a professional, that yourchances of getting a better
(43:59):
return for that same amount ofrisk is much greater than if you
do it yourself.
SPEAKER_03 (44:03):
Right.
SPEAKER_00 (44:04):
Um, you know, I remember this was many years
ago, but I I uh there was a aperson that came in um and you
know, they were a hundredpercent in stocks, which first
was like way too aggressive forthem.
Right.
Uh they didn't need to take thatmuch risk.
But secondly, they had it inlike 28 mutual funds.
And uh when we looked at all 28of them, it was like 19 of them
(44:26):
were the exact same.
They had a different name, youknow, they were from different
companies.
So he was you know, they wereall proud that they were
diversified, but they weren't.
They were concentrated becauseyou know they were all doing the
same thing.
Um and so in your zeal to beatinflation, again, you know, how
much stock should you have inyour portfolio?
Very rarely would we say that ifyou are retired, would you have
(44:49):
a hundred percent?
SPEAKER_02 (44:50):
Yeah.
SPEAKER_00 (44:50):
Now it's possible that if you're not retired yet
and you've got a few years togo, that it might make sense for
that, but but not for somebodywho's retired.
SPEAKER_01 (44:58):
Yeah.
Wonderful.
Awesome.
Well, those are uh fourstrategies beat inflation.
Um again, I think the uh thename of the game is talk to
somebody who this is theirbusiness.
Um figure out where you are andwhat your goal is.
Yep.
Um and inflation is just onepart of it.
It's it's one of three.
SPEAKER_00 (45:19):
Yep.
And the most important one isnot inflation.
SPEAKER_01 (45:22):
Mm-hmm.
Indeed.
Yes.
That yeah, that that's not themost dangerous one.
It's is it's ever present, butuh not the most dangerous.
Well, awesome.
Well, it was uh a little bit ofa shorter episode to this today,
but uh I appreciate you spendingthe time with me.
SPEAKER_00 (45:35):
Jeremy, you did a heck of a job as our uh as a
co-host.
Well done.
SPEAKER_01 (45:38):
I appreciate that.
SPEAKER_00 (45:40):
So as you saw today, inflation is one of the three
horses of the apocalypse when itcomes to threats to your
retirement as we see it.
Uh inflation is uh uhpersistent, it's it's a it's
it's it's it's reduces yourpurchasing power, it causes you
to have to spend more of yourshares of your investments to
(46:02):
keep up with it, and having astrategy to address that um is
extremely important.
So I hope you enjoyed this uh uhuh program.
Make sure that you subscribe tofuture uh podcasts as well as go
back and uh watch or listen toprevious ones and uh click below
to uh sign up for that.
And uh I appreciate youwatching.
(46:23):
Don't miss any of our deliciousand wonderful content in the
future.
And uh thanks thanks forwatching, we'll talk soon.
As you look at your retirement, as we see it, there
are three horsemen of theapocalypse.
Okay?
One of them is taxes, one ofthem is bear markets, which is
big drops in your investments,and the third is inflation.
So in today's episode, we'regoing to be talking about
strategies to beat inflation andto address the third of the
(00:23):
three horsemen of theapocalypse.
Hello and welcome to theRetirement Planners of America
podcast.
I am Ken Morafe.
I'm the founder and CEO ofRetirement Planners of America.
And uh we're a firm, as the nameimplies, that specializes in
(00:46):
retirement planning.
So today we're going to betalking about the third of the
three horsemen of theapocalypse, as we call them, the
three worst enemies you have toyour financial well-being.
But before I get going, let mejust tell you that uh we work
with over 6,500 beautiful,wonderful families across the
country.
And uh our goal is to have youenjoy your second childhood
(01:08):
without parental supervision.
That's our goal.
And in fighting inflation iscertainly an important part of
that.
Uh with me I have Jeremy, my uhco-host.
SPEAKER_03 (01:19):
Indeed.
SPEAKER_00 (01:20):
And I'm gonna hand the baton off to you, Jeremy, so
you take over here and lead usto the four powerful strategies.
SPEAKER_01 (01:27):
Absolutely.
Um inflation is is one of thosemonster words you hear a lot in
uh financial news.
Um pretty much all the time.
It's kind of one of those thingsthat's always in the back of
everyone's head.
Um when it's really low, um,people still whisper about it.
They're like, is it going back?
Oh no, where is it?
(01:48):
Uh and it inevitably rears itsugly head eventually.
Um what is inflation?
What's what's what's its whatmakes inflation, what does it
do?
SPEAKER_00 (02:01):
Well, you know, I'm I'm gonna kind of give you a
view of inflation that maybe youhaven't thought of in the in
this way.
Okay um inflation essentially iswhen a country becomes uh
poorer.
Okay.
So just to give you an example,let's say that food costs$300,
(02:28):
and you could afford it.
And now it costs five hundreddollars, and now you can't
afford it.
The food didn't change, it'sstill food.
Right.
It's just that you've becomepoorer.
You now can no longer afford it.
So inflation is kind of reversedto the way you may normally
think of it, that prices wentup.
It's actually a country becomingpoorer and not not being able to
(02:53):
afford the things that it couldbefore.
If you compare the U.S., youknow, and and with all the
inflation we've had, we'veexperienced our country becoming
poorer because of it.
But there are many places, youknow, that can't afford the
things that we can, right?
A cell phone, for example.
There are places where only richpeople have cell phones.
So that country is very, verypoor, even compared to us,
(03:15):
right?
And it it's so that that'sreally the way I look at
inflation is uh it's a veryterrible thing.
It's a it's a it's a cancer, iswhat it is.
SPEAKER_01 (03:25):
Yeah.
Yeah.
Only in relation to that dollarthat you have.
SPEAKER_00 (03:34):
Yes.
SPEAKER_01 (03:35):
Yeah.
SPEAKER_00 (03:36):
Yeah.
And uh, you know, uh what causesinflation is unfortunately, you
know, it it it it usually unlessthere's an exogenous event, you
know, like in with COVID, we hadthe supply lines were shut down,
right?
And so the supply of, you know,whatever it is that we wanted to
(03:58):
buy was cut off.
And so what few remaining onesthere were, everybody wanted had
to pay more for.
So scarcity causes prices to goup, and that could be
inflationary.
Um but those exogenous eventstend to take care of themselves
over time, just as you know,with the uh supply chains, there
it's not as uh big of a problemanymore.
(04:19):
Um But generally speaking,inflation is caused by too much
money chasing after a limited ora smaller supply of goods and
services.
And historically, what hascaused inflation is is
governments.
Yeah.
Um bad policy.
(04:40):
And uh when when governmentsdecide uh, you know, to buy
votes, um, and when they decidethat you know it they can
dispense large amounts of money,right?
What happens then is there theythrow a bunch of money into the
economy, and now there's thismassive amount of money, but the
(05:00):
supply of goods and servicesdidn't change.
So you created an imbalancebetween the amount of money
people have to buy things andthe amount of things there are
available to buy.
And when you do that, you makethe price of those things go up.
Yeah.
So, you know, there's there's anold expression about the the the
road to hell is paved with goodintentions.
(05:21):
I'm not gonna ascribe topoliticians evil intent.
Right.
I'm just gonna say in theirdesire, you know, to help people
and to do things, if they getover exuberant with it and they
put too much money into thesystem, then you get inflation.
And uh in our view, if you lookback at how much money has been
put into our economy sinceCOVID, I mean, more than I think
(05:44):
every year, you know, the entirehistory of our entire country
leading up to that point, at amultiple.
Yeah.
And when you put that much moneyinto an economy, even an economy
our size, uh, it's going tocreate inflation.
So that's the thing to keep youreye on.
And uh, you know, I I don't knowwhen politicians will learn
(06:05):
fiscal responsibility uh andlearn to, you know, kind of
manage their exuberance with uhwith throwing money at stuff.
But anytime the government putstoo much money into the system,
again, too much money chasingafter too few goods and
services, that's the definitionof inflation.
SPEAKER_01 (06:23):
Yeah.
And you know, I'm reminded ofthe the extreme examples, um,
you know, Venezuela and thingslike that, where people are
paying for groceries with poundsof money.
They w they weigh their money onscales instead of by individual
bills.
They wheelbarrow it in.
And they have to do it that day.
You got paid, you get paid dailybecause if you got paid weekly,
(06:45):
that money that you're earningon Monday is worthless by
Friday.
SPEAKER_00 (06:51):
You know, I had a client a few years ago who was
in his eighties and he wastelling me about you know his
grandfather back in World War I.
And uh they were actually uh inin Germany, they were Germans.
And he said that his grandfatherworked at a manufacturing plant
and they had this big fencearound it, and he would get they
(07:11):
paid him in cash back then, youknow, didn't have direct
deposits so he would get hewould get his cash, his his pay,
and he would literally like themoment he got it would sprint to
the fence and hand it throughthe fence to his wife, yeah.
And she would literally likesprint to the grocery store to
buy food because it was the thefood was uh the price was going
(07:34):
up so fast.
Yeah.
And again, if you look backthen, what happened?
It was an oversupply of of moneyor an undersupply of goods and
services.
Yeah.
SPEAKER_01 (07:43):
Um so with uh viewing that through the lens of
retirement planning, how do youhow do you address inflation?
SPEAKER_00 (07:55):
You know, uh so uh inf as I said, inflation is uh
uh one of the three biggestthreats to your uh financial
well-being when you're retired.
When you're working, not somuch, because in theory, you
know, you're gonna get uhraises, you know, cost of living
adjustments, et cetera.
But when you're retired, uhSocial Security to a certain
(08:16):
degree will do that.
But generally speaking, youknow, from your investments, et
cetera, you need to manage thoseaccordingly uh to have a
component of your portfolio thataddresses uh inflation.
And so strategies that um uhhelp to address that are
important.
You know, I've talked inprevious uh podcasts about how
(08:39):
you have a uh a tool, uh uh atoolbox, and in your toolbox you
got lots of different tools,right?
Each one's designed to do adifferent job.
And so uh you you don't want tobe like screwing things in with
a hammer, right?
Right?
So in your toolbox, as you lookat how you're invested and the
strategies that you use, youneed to have a tool in there
(09:01):
that is designed to addressinflation.
You need to have a strategy toaddress inflation.
And uh that that has to be partof your retirement plan in our
view.
If you don't, you're you'reyou're missing you're missing a
very uh uh important threat.
Now uh over the years um uhwe've we've we've heard that
gold is supposed to be like thisbig inflation beater.
(09:26):
It's the thing you buy, youknow, to fight inflation with.
I'm sure everybody has seen youknow a million TV commercials
and everything else, you know,buy gold, buy gold, buy gold.
Um gold got the reputation ofbeing an inflation fighter back
in the 80s.
SPEAKER_03 (09:44):
Okay.
SPEAKER_00 (09:44):
So and and I'll preface this by saying that that
gold is not an inflationfighter.
Gold is a fear fighter.
When people get scared, theywant to buy gold.
Right?
They want to have a hard asset,you know, when they get scared.
And so that does sometimescoincide with inflationary
(10:05):
periods, but not always.
But the big one was in the early80s when we had, you know, the
highest inflation we've ever hadin our country, even higher than
what we've experienced lately.
And our economy was literally onits back.
You know, we had oil embargo, wehad inflation, I mean, uh
everything it was a it was agiant perfect storm of economic
(10:28):
bad stuff, and we were on ourback.
And the US economy was on theverge of becoming a a
second-tier economy.
I mean, uh that that's where wewere.
And people were so scared thatthey bought gold.
And so gold went up tremendouslyand did way better than
inflation.
Ergo, gold is an inflationfighter.
(10:49):
Oh, yeah.
But if you look at, you know,long-term trends, what you'll
find is that gold is not always,and in most cases actually, is
not a good inflation fighter.
It's a good fear fighter.
Right.
If people are scared.
Right.
And sometimes inflation causesfear, as in uh, you know, back
in the 80s.
But inflation doesn'tnecessarily always cause the
(11:11):
kind of panicky fear wherepeople feel like I need to put
all my money in gold bars.
SPEAKER_03 (11:16):
Yeah.
SPEAKER_00 (11:16):
But you know, the other thing I I I uh find kind
of a an interesting questionwith with the gold bars, um, is
okay, so inflation's gotten sohorrible that you know you're
you're you have all these goldbars.
Right.
And so, I mean, what what areyou gonna are you gonna go down
to the grocery store, you know,with your pen knife and you're
(11:37):
gonna scrape off some gold offof your gold bar?
I want to buy my groceries with,you know, five shavings of this
gold.
You know, and and it's it's kindof heavy, and you know, where
you have to where are you gonnastore it?
So uh I don't I don't know thatuh you know uh that gold uh is
the best way to invest, the beststrategy to use to fight
(11:57):
inflation with.
SPEAKER_01 (11:58):
Yeah, yeah.
That was that was always been myquestion.
Is uh number one, who decidedthat?
Who decided that gold was thisinflation beater?
Yeah, I'm guessing people thatown gold.
SPEAKER_00 (12:10):
Uh back in the early 80s, I mean, there was literally
uh, you know, a a cold sweatpanic uh with regard to where
our economy was and where wherewe were going to what was going
to happen.
And uh so that that extreme fearcaused people to buy uh gold and
gold skyrocketed.
Yeah.
(12:30):
And people attributed that toinflation.
Yeah, right.
You know, it's it inflation goesup, gold goes up.
No.
Yeah.
It's it's fear that that causespeople to buy gold.
Right.
SPEAKER_01 (12:41):
Yeah.
And and then then how do youexchange that?
Here's a gold coin, please.
Uh I'd like my yeah.
SPEAKER_00 (12:50):
Yeah, as a currency, I think uh, you know, cash
probably is uh when the zombiescome, you know, or or the pulse
from the sky or whatever, andthere's no money.
Uh I don't know that even goldbars are gonna work in that
scenario, but cash will.
SPEAKER_02 (13:04):
Yeah.
SPEAKER_00 (13:04):
You know, I I don't people won't take your credit
card because it won't work.
Right.
They might not take yourdigital, you know, on your
phone.
But uh cash, cash money wouldmake a comeback, in my view.
But anyway, we're getting intothe zombie apocalypse.
Let's talk retirement planning.
Yeah, okay, okay.
SPEAKER_01 (13:20):
So having a strategy is super important.
So let's let's talk a coupleabout a couple of those
strategies.
Um and the and the firststrategy that we want to the
first of four is high yieldsavings accounts.
SPEAKER_00 (13:33):
What is a high yield savings account?
Okay, so as the name implies,high yield.
Yield means like interest, youknow, and and and dividends,
which also mean interest.
Uh so uh uh whenever you hearthe word yield or dividends,
generally what you're talkingabout is um the interest rate
(13:54):
that this investment isgenerating for you.
Okay.
So a high yielding savingsaccount is a savings account
that pays a high interest rate.
SPEAKER_03 (14:03):
Okay.
SPEAKER_00 (14:04):
Um you have to be careful with those uh because
again, if if you're if you'relooking for this to be your
inflation fighter, then uh whenthe interest rate on that high
yield investment is higher thanthe inflation rate, it helps
you.
But if it's lower, then itdoesn't.
So you have to make sure you'redoing that.
(14:24):
But generally speaking, uh highyield savings accounts, what
happens is that when inflationstarts to heat up, the Federal
Reserve wants to, you know, taketake the economy, slow the
economy down, slow spendingdown, slow demand down, so that
when demand goes down, theprices will come down and fight
(14:45):
inflation, which we'veexperienced, you know, here over
the last uh uh little bit whereyou know the the Fed raised
interest rates dramatically.
Why they do that?
They want to drive down uhinflation.
So what happens when thathappens is that the high yield
savings account, usually about10 days, so when the Fed says
we're raising interest rates byhalf a point, half a percentage
(15:07):
point, uh usually within 10 daysthat high yield savings account
will go up commensurately.
Right.
So there's a little bit of alag, but generally speaking, it
it moves right along with whatthe Fed's doing.
So why does that become then aninflation fighting tool?
Well, because the interest rateyou're getting will rise as
inflation rises.
(15:28):
And for like an emergency fundor a place like that, you know,
that certainly could be a place.
SPEAKER_01 (15:33):
Right.
Um so I I have my money, Idecide, okay, here's one
strategy we're gonna put somemoney into this high yield
savings account.
What does it do when it'ssitting there?
Like, like how do how does thatactually work?
I I get we're taking it andwe're putting it here.
Who's taking that money?
Who's paying that out?
(15:54):
Who is you know, like really,like how does it how does that
actually work?
SPEAKER_00 (15:59):
Well, you know, it it it depends on what kind of a
high yield savings accountyou're using.
There you can you can uh thatthat high yield savings account,
the investment behind it couldbe government backed, right?
Which should generally itwouldn't pay you as high of an
interest rate, but if it is ahigh yielder and it's set and
it's tied to what inflationdoes, you know, it could help
(16:21):
you there.
Um there are non-governmentones, which generally are are uh
the the underlying investmentare corporate bonds and those
kind of things.
And in that scenario, there'sthere's more risk involved,
right, than the government, sothat's why you get a higher
interest rate.
So um yeah, you have to kind oflook at what the under that's a
(16:43):
very good question.
If if you're uh in thegovernment ones, then it's
backed by the full faith andcredit of the uh printing press
that they have in Washington.
Yeah, yeah.
Uh and and and uh if it's not,then it's the full faith and
credit of the companies that arebehind that.
And if they go under, then youknow, right, so does uh so does
everything else.
So uh yeah, that's a really goodquestion.
(17:06):
Ask where or or who is this, youknow, who is this invested in?
Yeah.
Uh what is it invested in, whoand who is paying the interest,
and uh what's the risk of theirsolvency?
Because you know, in in 2008, wesaw um a lot of uh high-yield
investments that were consideredsuper safe, right, that turned
(17:28):
out to be very high risk and andlost a lot of money.
SPEAKER_01 (17:31):
Yeah, and even recently there was a a certain
bank that uh had to have alifeline thrown to them uh by
the federal government.
And again, that's you know, ifthey didn't get that lifeline,
if you had money with them, itwas gone.
SPEAKER_00 (17:45):
Yeah.
You know, since I went throughit, I'll share with you a story
of uh what happened in 2008.
So uh money market accounts uhfunds, um at the time people
were looking for the highestinterest rate that they could
get in a money market fund.
And you always had the choice,you know, of a government
security backed one and a and acorporate bond kind of thing or
(18:06):
a real estate, you know, uhbacked uh uh investment.
And what happened with thosemoney market funds is that there
was a fear at the time that theywould actually go under or they
they at the you know or breakthe belt, uh break the buck, as
they call it, where you put adollar in, it's worth less than
a dollar, or worse, it couldlike go under.
SPEAKER_03 (18:26):
Right.
SPEAKER_00 (18:26):
And so there was this growing fear that I need to
get my money out of all thesemoney market funds.
And the problem with that isthat the money market funds are
the lifeblood of our economy.
It's what businesses andeverybody else uses to pay their
bills, you know.
And so it's kind of like ifeverybody, if there was a run on
the bank on the money marketfund, it's like you took the
(18:48):
blood out of out of the out ofthe bloodstream and the body's
gonna die.
SPEAKER_02 (18:52):
Yeah.
SPEAKER_00 (18:52):
So the Federal Reserve was like, okay, we gotta
we've got to stop this beforeyou know people panic and we
have a run.
And so they came out and theyactually said, we will guarantee
money market funds to anunlimited amount.
Oh, wow.
Unlimited.
It doesn't matter how much youhave in it.
You could have$500 million,we're gonna guarantee all of it.
(19:13):
And so because they said that,everybody calmed down and the
panic went away.
SPEAKER_03 (19:17):
Yeah.
SPEAKER_00 (19:17):
This was in uh, I think it was around 2009-ish or
so.
Well, then what happened waseverybody calmed down and the
panic went away, and the moneymarket funds uh, you know, the
confidence uh was regained.
Two years later, the governmentcame out and said, Okay, we're
not doing that again.
So what we're gonna tell youright now is yeah, they won't do
(19:38):
that again, we'll see.
But but we won't we're not doingthat again.
So going forward, if you're notin the government-backed one,
we're not covering you.
SPEAKER_03 (19:48):
Okay.
SPEAKER_00 (19:49):
Okay, and and so what happened was that there was
a giant uh sucking sound.
And the move a lot of moneysaid, okay, I'm I'm not going
there, and went into thegovernment-backed ones.
Yeah.
Um I suspect that over the yearspeople have forgotten that
lesson.
Right.
And are maybe betting that ifall heck breaks loose, the Fed
(20:10):
will step in again, and maybethey will.
Uh, but I think there's a lot ofmoney that is no longer in the
government-backed side, and it'sgone to the other side because
of the higher interest rates youcan get.
Right.
And people have short memories.
But maybe that little walk downmemory lane, a little historical
lesson will will tell you.
Trevor Burrus, Jr.
SPEAKER_01 (20:28):
Yeah, yeah.
For the for the governor thegovernment to guarantee money
that's not theirs necessarily.
That's uh I guess it reallyshows how much of a panic
everyone was in.
SPEAKER_00 (20:43):
Yeah, and at the time, you know, there were a lot
of conversations about what theycalled the moral hazard.
SPEAKER_01 (20:48):
Yeah.
SPEAKER_00 (20:48):
In other words, if you do it once, you know, are
you forgiving people for theirbad behavior?
Yeah.
And and therefore you set aprecedent.
Yeah.
And and maybe you should letpeople suffer the consequences
of their actions.
Right.
But the counter to that was,yeah, well, fine.
Let's watch the economy diewhile we're teaching people a
lesson on responsibility.
You know, it's kind of what agreat lesson.
(21:10):
It's like the economy died.
There.
We showed you.
Yeah, but you messed up and nowwait, what happened?
We're in depression 2.0,everybody's on food lines, but
man, we taught you a lessonabout where you should keep your
money.
So yeah, and and so I I hate tosay it, but I think probably if
we got to that point again, thethe Fed may step in.
(21:30):
Yeah.
But right now, they said, no,don't don't expect that again.
If you're not in the governmentbacked, we we're not gonna we're
not we won't back it.
SPEAKER_01 (21:39):
Right.
Okay.
Okay.
Fair enough, I guess.
Um okay.
So high yield savings accounts.
Um strategy number two, investin the stock market.
SPEAKER_00 (21:50):
Yeah.
Now we have four strategies,right?
SPEAKER_01 (21:53):
Yes.
SPEAKER_00 (21:53):
I actually want to save that one for last.
Can you can you skip that one?
SPEAKER_01 (21:56):
We can skip that one.
SPEAKER_00 (21:57):
Okay, because that one's really important.
Go to let's go to the others.
SPEAKER_01 (22:01):
Okay.
All right.
We'll call strategy number two,we'll call that four.
So we'll just we'll just changethe numbers here.
So real strategy number two isdelayed social security
benefits.
SPEAKER_00 (22:15):
Aaron over there, our producer is going crazy.
He's like, wait a second, youcan't flip the numbers on me.
So yeah, so delaying SocialSecurity benefits.
Yeah.
So what happens with SocialSecurity is that the longer you
delay starting, okay, you getincreases in the amount you're
(22:39):
going to get eventually.
Right.
Okay.
So for example, let's say thatyou you could start when you're
62, uh, but you choose to waituntil let's say your normal
retirement age is 67.
Right.
Okay.
So you're going to wait fiveyears before you start.
During those five years, theamount of your Social Security
will increase.
They they uh add a cost ofliving adjustment to it.
(23:00):
Uh they call it delayed credits.
The other thing that happens isthat if you wait from your
normal retirement age untilyou're 70, then you get the
delayed credits all the way foranother three years, right?
So uh delaying as long aspossible gets you the highest
payout because inflation isgonna increase the value of
(23:20):
those pays, of those payouts.
Um but once you reach age 70,they don't do it anymore.
It stops there.
So delaying starting SocialSecurity does have the benefit
of the you know the the paymentsyou're gonna get being higher
due to inflation, but once youreach 70, they don't increase it
(23:40):
anymore.
Yeah.
So there is no reason that I canthink of that you would want to
delay getting Social Securitybeyond the age of 70.
SPEAKER_02 (23:47):
Yeah.
SPEAKER_01 (23:49):
Um what would that mean if we think of that in
terms of compounding interest?
SPEAKER_00 (23:58):
Yeah, so you know, the delayed credits are not uh
compounded interest.
You know, like for example, whatwhat they say is that you're
gonna get an 8% increase eachyear on on the amount you're
gonna get paid uh if you wait.
That they're they're notinflating the value, uh it's not
it's not inflated, it's an eightpercent increase.
(24:19):
Um it's a it's it's it's it's uhit's confusing on how to explain
that, but it it but it isdifferent.
Yeah.
So don't assume that what itmeans is that you're getting an
8% increase every year on whatyou're gonna get, because it
isn't.
It's it's an 8% credit.
Um But regardless of that fact,the longer you wait, the higher
the amount you're gonna get.
And so therefore, if inflationis going up, you want the income
(24:42):
you're gonna get to be higher.
Right.
So delaying Social Security canbe a way of mitigating against
inflation.
But again, don't you know gopast age 70 because once you get
after that, there are no therethey don't increase anything
after that.
So if you go for till you're 80to start, then those 10 years
you didn't get you didn't getwhat you're you know, the the
(25:03):
payments you could have gotten.
And then number two, they're notpaying you more at age 80 than
70.
SPEAKER_01 (25:08):
Yeah, yeah.
And obviously everyone'ssituation is different and and
unique.
So that rule doesn't apply toeveryone all the time.
And so it's really important tohave somebody that knows uh your
situation, knows the rules andthe laws and that are changing
(25:28):
every year, keeps up to datewith it, and can make that very
personalized kind of plan foryou.
SPEAKER_00 (25:37):
Yeah.
That that's a very good point,and it's totally self-serving
given that's what we do.
So thank thank you for that one,Jeremy.
Of course, of course.
Um But yes, you know, SocialSecurity, uh as I've said many
times, if there was an Olympicsuh for um complexity, Social
Security would win the goldmedal every time.
There's over 9,000 combinationsof when and how to take Social
(25:59):
Security.
So it's it's it's not just aninflation question when it comes
to Social Security, althoughthat is part of it.
Uh it's also when and how.
Uh but yeah, um talking withsomebody that is versed and
trained and certified in SocialSecurity, I think, is is very
important.
And with all of our retirementplanners in our firm, uh we
(26:20):
require them to go through ourtraining and our certification
uh so that we can feel confidentthat when they're talking to
clients and prospective clientsthat that they uh know what
they're talking about.
SPEAKER_01 (26:32):
Absolutely.
Absolutely.
Okay, so delaying SocialSecurity benefits could be a way
to mitigate the effects and tobeat inflation.
Um Strategy number three,reassess your budget and
spending.
SPEAKER_00 (26:51):
Yeah.
Um so again, going back to otherthings we've talked about in
other uh podcasts that we'vehad, we always want to start
with what we call an RCFP, aretirement cash flow plan.
The retirement cash flow planhelps us to look into the future
and make assumptions as towhat's going to happen with your
(27:14):
cost of living.
You know, how how much inflationshould we apply to it, and how
does that affect the ability ofyour money to support the
lifestyle that you want.
So when it comes to looking atthat, we want to look at your
financial health.
Uh it's kind of like a doctor,you know, where you go in and
they uh they take your bloodpressure and they take your
cholesterol and they do allthose kind of things.
(27:36):
And basically you want to keepmonitoring those things over
time, right?
Right, to make sure that you'renot headed in the wrong
direction, or if you are alreadyin the wrong direction, that
you're headed back into the gooddirection.
And so it's the same thing withthe retirement cash flow plan.
We want to look at yourfinancial health and take into
account, unfortunately, I think,a a cancer that is in your
(27:57):
investments and is in yourfinancial life, which is uh
inflation.
SPEAKER_03 (28:00):
Yeah.
SPEAKER_00 (28:01):
And so is it getting out of hand, you know, and do we
need to do something about it?
So and and and the importantthing is to not look at it on a
one-year basis, but but projectit out.
Yes.
You know, obviously projectionsare never going to happen
exactly as you planned.
Right.
But you want to project out, andwhat we do is we look at a uh
(28:21):
what we call a semi-worst casescenario.
Okay, so we want to overestimateon bad stuff and underestimate
on good stuff, so we create a auh a conservative, if you will,
um, you know, scenario goingforward, looking into the
future.
And if you're okay with that,then you'll be okay under
something better.
Yes.
But by doing that, by looking atthat cash flow and projecting it
(28:43):
out over the years, now what youhave is a picture of how is
inflation going to impact me andwhat changes can I make now that
over time, because you know, thecompounding value of money is
all about time.
Right.
And the longer time you have toaddress inflation and to make
small changes today, the they'llcompound over time as opposed to
(29:06):
waiting until the last minute,and then all of a sudden it's
like, oh my gosh, I gotta likecut my cost of living in half
because I can't afford itanymore.
Right.
And uh that can get problematic.
So planning, looking into thefuture, building your uh cash
flow plan, taking into accountinflation, uh, and looking five,
ten, fifteen years, knowing fullwell it's not gonna happen
(29:26):
exactly like that.
Sure.
But at least giving it aconservative view so that you
have a high confidence that it'sgonna be better than that if it
does happen.
SPEAKER_01 (29:34):
Yeah.
Talking about budget andspending, because inflation's
not going to uh increase theamount you have coming in
usually to uh as much of adegree as it's gonna affect how
much you're spending um whatwhat's going out, because
inflation is gonna affect thecost of pretty much everything
that you're touching.
Um what is a cost that you'veseen that really adds up over
(30:01):
the years?
Maybe it looks small in thebeginning, talk about that
compounding effect.
What's something that lookssmall in the beginning, and then
you look five or ten years laterand you say, wow, that added up
so fast?
Where did that come from?
SPEAKER_00 (30:14):
Um Well, I'm I'm laughing because the answer to
your question is travel.
The reality is that you know umdifferent things are more
important to your budget thanothers.
You know, so depending on yourfinancial situation, uh food and
(30:37):
gas may not be as large apercentage of your cost of
living that it may be forsomebody else.
And so um in many cases with ourclients, you know, yes, their
cost of food is going up andtheir cost of uh you know, those
kind of things, their utilitiesand all that are going up, but
as a percentage of their totalcost of living, you know, those
(30:58):
things are not a very big deal.
Um many of them have mortgagesthat we want to get paid, pardon
me, that we want to get paidoff, but mortgages, the payments
generally stay the same.
Right.
So they're not subject toinflation.
So really it's uh the biggestthings I would say are the cost
of having fun.
(31:18):
You know, it goes up.
Yeah.
And since that's an importantpart when you're retired, you
want to have fun.
Absolutely and the cost of stuffgoes up.
Have you seen the price of golfballs lately?
No, I haven't.
Oh my gosh, it's ridiculous.
Have you seen the price of likea cup of coffee at at a at a at
a it's it's like you know, thethe things that were like your
little your little luxuries, youknow, all of a sudden it's like,
holy cow.
Yeah.
(31:39):
Right?
So that's that's that.
Um so yeah, you ha you have touh the interesting thing is that
a lot of the fun things are theones that uh that that go up the
most for once you're retired.
SPEAKER_01 (31:52):
Yeah.
Well, uh speaking of the priceof golf balls going up, the the
prices really stays about thesame for me because I usually
just go out into the the waterhazards and just scoop up
whatever I can.
Because I usually end up puttingthem back in there, so I'm
reusing them all the time.
As long as you put back as muchas you take out and you feel
good about it.
Yeah, yeah, that's exactly it.
(32:14):
It doesn't affect that.
Oh man.
Okay.
Uh so moving on.
So recessing your budget andspending.
The last one.
SPEAKER_00 (32:24):
Yeah, and and before we leave that, you know, one of
the things that we do from thestandpoint of looking at your
financial health is, you know,there is an assessment that you
need to do um, you know, pr atleast once a year where you look
at what what is your cost ofliving, how much are you
spending, and is that stillappropriate?
Yeah.
And so that is an exercise thatis a valuable one and needs to
(32:47):
be done.
Um, you know, in a lot of cases,it's it's not a bad thing.
You know, sometimes uh whathappens is that you could spend
more.
SPEAKER_03 (32:55):
Yeah.
SPEAKER_00 (32:55):
You know, and and one of the things that I tell
all of our retirement plannersis that, you know, uh our
clients for the most part arevery uh they they've they've put
a lot of money aside, you know,they've been very diligent,
they've been, you know,investing and all that, and
their nest egg is is kind oflike you're not allowed to touch
that.
SPEAKER_02 (33:14):
Yeah, right.
SPEAKER_00 (33:15):
You know, it's like that's scary.
That's like you put it over hereand you are not allowed to touch
that.
Now you retire and you gottatouch it, right?
You gotta start taking moneyout.
It's like you spent your wholelife thinking I must never touch
that.
You know, it's like I will doanything that I need to, you
know, without ever touchingthat.
Right.
And now you're taking it.
And uh so you know, as uh as youlook at that, um, one of the
(33:39):
things that I I tell retirementplanners is you need to give uh
clients permission to spendtheir own money.
Right.
A lot of times they come in andthey're like, oh my gosh,
inflation is taking off and allthis stuff, you know, and I'm
gonna be poor and I can't handlethis.
And so you you do the retirementcash flow plan with them and you
show them where they are.
And if they're you know in thefortunate group, well, guess
(34:00):
what?
Yeah, you can actually spendmore.
Yeah, yeah.
You know, in in spite of that.
Others, yeah, you need to cutback.
Right.
But that's that's what we do,that's our job.
SPEAKER_01 (34:09):
Yeah.
Again, we keep going to thisover and over again.
Know where you're at and knowwhere you're going.
Right.
Super important.
It's super important to havethat, and to have somebody that
isn't as um emotionally involvedor connected to that money, you
know.
You know, we're we're we'reemotionally connected to our
clients, obviously, but not tothe degree that a client is
(34:32):
connected to their nest egg.
SPEAKER_00 (34:34):
Yeah, yeah.
I agree with that entirely.
I think it it's kind of like uh,you know, if I was a a surgeon
and I had to perform surgery onmy wife, yeah, that I I you
know, I I wouldn't even want todo that.
Yeah.
You know, I'd be too emotionallyinvolved.
And so, and in particular, and Iwouldn't want to do it on myself
either.
Right, right.
Then then that would really bedifficult.
So, yeah, doing this yourself,uh, you have greed, you have uh
(34:58):
fear, you know, you got allkinds of emotions that are
coming into play.
Um, so yeah, I I think workingwith a professional is
important.
Absolutely.
SPEAKER_01 (35:07):
Okay, anything else?
Yeah, so we got to get to numberfour.
Number four.
Yeah.
Formerly number two, now numberfour.
Did you get that, Aaron?
Uh investing again, again,strategies to beat inflation.
Yeah.
Um, investing in the stockmarket.
SPEAKER_00 (35:25):
Yeah.
Okay.
So before I was talking about,you know, gold um, in our view,
is not the best inflationfighter.
Right.
It's had its moments, but again,we think of it as a fear fighter
as opposed to an inflationfighter.
So, what is the best investmentto fight inflation with?
The answer, thanks for thespoiler there, Jeremy, is uh is
(35:48):
stocks.
Yeah.
The stock market historicallyhas been the best inflation
fighter that you can use.
Um again, not always, but forthe most part.
And here's why.
When when a company, let's saythat they sell something um for
$100, and when they sell it for$100, they make$5 profit.
(36:12):
Okay, so they have a 5% margin.
SPEAKER_03 (36:13):
Okay.
SPEAKER_00 (36:14):
So they make a 5% profit, and what happens next is
that the cost of whateverthey're selling goes to$110.
It went up by 10%.
So normally what they do is theypass that along, and they still
want to get, you know, their 5%margin.
So now the mar the$5 went to$5.50.
It went up by by uh 10% also.
SPEAKER_03 (36:35):
Right.
SPEAKER_00 (36:35):
So what happens is that in in most cases, uh
companies are valued based ontheir earnings.
SPEAKER_03 (36:42):
Yes.
SPEAKER_00 (36:43):
Right?
So their profits.
Right.
So if their profit just went up,their stock price went up as
well.
SPEAKER_03 (36:48):
Right.
SPEAKER_00 (36:48):
So essentially what happens is inflation is
inflating the stock market atthe same time.
Yeah.
So because of that, the stockmarket is actually one of the
most, here's a word for you,efficacious.
You like that word?
Oh, I do.
I do like that word.
SPEAKER_04 (37:03):
Yeah, yeah.
SPEAKER_00 (37:06):
It's one of the most efficacious tools to use to
fight inflation.
It's the one we use.
So having said that, Jeremy, ifinflation is the best tool to
fight inflation with, I'm sorry,if the stock market is the best
tool to fight inflation with,then we should just sell
everything and put it all in thestock market.
SPEAKER_01 (37:24):
Makes sense to me.
Yeah.
SPEAKER_00 (37:25):
Yeah.
Why wouldn't we?
SPEAKER_01 (37:26):
You were supposed to say no, we would never do that.
I mean, absolutely do not dothat.
Ken, what do you think?
SPEAKER_00 (37:34):
Well, because if if if in fact putting all your
money in the stock market is thebest way to fight inflation,
that's what you're worriedabout, then here's what I
suggest.
Everybody listening to this,watching this, uh I want you to
uh turn all your i it's theequivalent of uh of going to Las
Vegas and betting it all onblack.
SPEAKER_01 (37:53):
You're saying that's not a good idea.
SPEAKER_00 (37:55):
Aaron Ross Powell Well, if if it was, then
everybody listening andwatching, then what I want you
to do is sell everything yougot, uh-huh.
Okay, turn it all into cash,uh-huh, and we'll meet out
front.
We'll have a bus and we'll allget on the bus with our suitcase
full of cash, we'll go down toLas Vegas and we'll bet it all
on black.
SPEAKER_03 (38:10):
Okay.
SPEAKER_00 (38:10):
And if it hits, we're gonna be really, really
rich.
Absolutely.
But if it doesn't, then wewon't.
Oh.
Right?
That wouldn't be.
That wouldn't be a good outcome.
SPEAKER_02 (38:19):
No.
SPEAKER_00 (38:19):
So putting you so so determining how much stock
market you should have uh, youknow, in your portfolio, because
it's risk, right?
Stock market is not as uh assafe as, for example, the CD
down at the bank uh from acapital loss standpoint.
Right.
So determining how much stockyou should have in your
portfolio, how how important isthat tool in your toolbox to
(38:42):
you, is determined once again byhow much risk you need to take
to accomplish supporting thelifestyle that you want.
SPEAKER_02 (38:49):
Yeah.
SPEAKER_00 (38:49):
Okay, so for example, if we can if we can
satisfy giving you the incomeyou need for the rest of your
life, uh, you know, subject toinflation and all the rest of
it, with a 4% return.
Well, that would dictate adifferent level of stock market
in your portfolio than if theanswer was 6% or 8%.
Yeah.
Hopefully it's not 8%.
(39:10):
But if it was 8%, you can't dothat by putting it all in CDs or
whatever.
Right.
Right?
Or in bonds or or you you haveto get more aggressive, go more
stock to be able to get that.
So the amount of risk that isnecessary to accomplish your
goals uh helps to determine howmuch stock market you should
have in your portfolio.
Yeah.
And you know, as we always say,we want to take the least amount
(39:31):
of risk necessary to accomplishyour financial goals.
So when we create thatretirement cash flow plan, that
helps us to determine how muchrisk you need to take.
And once we know that, then wecan construct the portfolio with
what we would think is theappropriate amount of stock
market for you.
SPEAKER_01 (39:47):
And and stock market is a very broad term.
SPEAKER_00 (39:50):
Yeah, when I when I yeah, that's true.
SPEAKER_01 (39:52):
Yeah.
And here we're we're we'retalking mainly about the S P
500.
SPEAKER_00 (39:57):
Well, I'm talking about equities.
Yeah.
Um, and so it it would includethe S P 500 index is the is 500
very large companies, but itwould also include smaller
companies and mid-cap companies.
Yeah.
But the percentage, I'll call itequities, that's another word
for stocks.
Okay.
The percentage of your portfoliothat uh is uh that should be in
in uh uh in equities, uh in ourview is determined by how much
(40:21):
risk you need to take.
And how much risk you need totake is determined by your
retirement cash flow plan thatdetermines what how much you
need to cover for inflation.
SPEAKER_01 (40:30):
How do you decide what to invest in inside of that
percentage of the stock marketinvestments?
SPEAKER_00 (40:38):
So uh one of the things that we want to there
there's a um a term called theefficient frontier.
And the efficient frontierbasically looks at how much
risk, how much return are yougetting for a given level of
risk.
And so diversification isintended to give you the highest
(41:00):
return for the least amount ofrisk.
So it is not the highest return.
Correct.
Because the highest return wouldbe the highest return with the
most amount of risk.
SPEAKER_03 (41:08):
Absolutely.
SPEAKER_00 (41:08):
But it also could come with the biggest loss.
So when you're constructing aportfolio, what you want to do
is have a mix and match ofthings in there that gives you
the highest return against therisk.
So you're trying to balance thetwo, and you want to come up
with the efficient, it's calledan efficient frontier.
(41:30):
And uh this is something thathas been, you know, Nobel Prize
laureates have built for us, uh,you know, have done a lot of the
economists have done a lot ofwork on that.
And they're still doing it, ofcourse.
There's always room forimprovement, but uh we use you
know eco uh economic models tohelp determine how much of it's
it's kind of like uh you know arecipe for for uh your apple
(41:50):
pie.
You know, how much salt shouldyou have, how much sugar should
you have, you know, how how youknow all the stuff that goes
into that.
SPEAKER_01 (41:57):
Right.
Yeah.
Because you know, if we'retalking about the SP 500, that's
500 companies.
I uh would uh venture a guessthat the companies that they do
business in, the categories orthe business types is pretty
broad.
Yeah, it is.
Um and so they're gonna beaffected by everything that's
(42:17):
happening on in the world verydifferently.
SPEAKER_00 (42:20):
Yeah, those companies are all global scale
companies.
So yeah, they're they're um youknow, they're investing
overseas.
They maybe even have plants oremployees overseas, and so
they're global in most cases.
Um smaller companies may besomething that you're want to s
smaller companies are kind oflike Tabasco sauce, you know.
A little Tabasco sauce on yourpizza is okay, but emptying the
(42:42):
whole bottle in there, not sogood.
So uh, you know, small caps uhadd a little spice and they can
do very, very well in properenvironments, mid-caps same.
So they tend to zig while theother one zags.
Right.
And so again, a diversifiedportfolio is one that you're
trying to you're trying to hitthat efficient frontier.
It's it's there's no you nobodyactually hits it exactly.
It's a it's a moving target.
(43:03):
But the idea is to get as closeto it as possible.
Yeah.
So again, what you're doing isyou're taking uh you know only
as much risk as is necessary toaccomplish your financial goals,
and since we're talking aboutinflation today, to to
compensate for the effects ofinflation.
SPEAKER_01 (43:17):
Yeah.
That's th those are very umin-depth strategies that uh are
not very simple.
Um I don't think I want to beable to uh go home and uh figure
that out myself.
Um is there anything we're we'remissing out of these strategies?
SPEAKER_00 (43:36):
Um Well, I think uh strategies themselves, I don't
think that there's I I thinkwe've covered it nicely.
Uh but I think what you said isalso part, I think it should be
part of your strategy uh andthat is to work with a
professional.
Um there are many studies thatshow that if you're working with
a professional, that yourchances of getting a better
(43:59):
return for that same amount ofrisk is much greater than if you
do it yourself.
SPEAKER_03 (44:03):
Right.
SPEAKER_00 (44:04):
Um, you know, I remember this was many years
ago, but I I uh there was a aperson that came in um and you
know, they were a hundredpercent in stocks, which first
was like way too aggressive forthem.
Right.
Uh they didn't need to take thatmuch risk.
But secondly, they had it inlike 28 mutual funds.
And uh when we looked at all 28of them, it was like 19 of them
(44:26):
were the exact same.
They had a different name, youknow, they were from different
companies.
So he was you know, they wereall proud that they were
diversified, but they weren't.
They were concentrated becauseyou know they were all doing the
same thing.
Um and so in your zeal to beatinflation, again, you know, how
much stock should you have inyour portfolio?
Very rarely would we say that ifyou are retired, would you have
(44:49):
a hundred percent?
SPEAKER_02 (44:50):
Yeah.
SPEAKER_00 (44:50):
Now it's possible that if you're not retired yet
and you've got a few years togo, that it might make sense for
that, but but not for somebodywho's retired.
SPEAKER_01 (44:58):
Yeah.
Wonderful.
Awesome.
Well, those are uh fourstrategies beat inflation.
Um again, I think the uh thename of the game is talk to
somebody who this is theirbusiness.
Um figure out where you are andwhat your goal is.
Yep.
Um and inflation is just onepart of it.
It's it's one of three.
SPEAKER_00 (45:19):
Yep.
And the most important one isnot inflation.
SPEAKER_01 (45:22):
Mm-hmm.
Indeed.
Yes.
That yeah, that that's not themost dangerous one.
It's is it's ever present, butuh not the most dangerous.
Well, awesome.
Well, it was uh a little bit ofa shorter episode to this today,
but uh I appreciate you spendingthe time with me.
SPEAKER_00 (45:35):
Jeremy, you did a heck of a job as our uh as a
co-host.
Well done.
SPEAKER_01 (45:38):
I appreciate that.
SPEAKER_00 (45:40):
So as you saw today, inflation is one of the three
horses of the apocalypse when itcomes to threats to your
retirement as we see it.
Uh inflation is uh uhpersistent, it's it's a it's
it's it's it's reduces yourpurchasing power, it causes you
to have to spend more of yourshares of your investments to
(46:02):
keep up with it, and having astrategy to address that um is
extremely important.
So I hope you enjoyed this uh uhuh program.
Make sure that you subscribe tofuture uh podcasts as well as go
back and uh watch or listen toprevious ones and uh click below
to uh sign up for that.
And uh I appreciate youwatching.
(46:23):
Don't miss any of our deliciousand wonderful content in the
future.
And uh thanks thanks forwatching, we'll talk soon.
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