Beating Inflation

Inflation quietly erodes the value of every dollar you hold — and on a fixed retirement income, that erosion can be especially painful. In this video, Michael Alman explains how inflation works and shares three practical strategies for staying ahead of it.

Video transcript

Hello, my name is Michael Alman, and I’m a financial adviser with Patriot Asset Advisors. Today I wanted to talk about inflation and protecting your money’s future. Have you ever noticed that things cost more than they used to? I remember reading a book as a child called Whatever Happened to Penny Candy? It covers a range of economic principles, but it primarily discusses inflation — where a piece of candy that once cost a couple of cents now can’t be found at any gas station for less than a couple of dollars. Why is that? Inflation, and the rising cost of goods and services.

Inflation is simply the rise in the cost of goods and services over time, which leaves you with less buying power. The value of money goes down as prices rise. Something that costs $100 today, even at 3% inflation, will cost about $180 in 20 years. The reality is that if your money isn’t growing faster than the rate of inflation, you’re falling behind.

In retirement, inflation can be especially dangerous. You’re living on a fixed income — the amount coming in typically isn’t growing from one year to the next — but the cost of groceries, health care, and housing keeps rising. As we saw in that 20-year example of $100 becoming $180, is your monthly income able to absorb an 80% increase in expenses over the course of your retirement? If you’re not planning for that, your lifestyle could take a big hit. The good news is there are several strategies to combat inflation.

1. Invest for growth. As we age, it’s natural to want to preserve wealth and protect against loss, and near retirement you’ll often shift more of your portfolio into bonds as a safety net. But cash feels safe while quietly losing buying power year after year — if you converted everything to cash, you’d never outpace inflation. Growth investments like stocks have historically outpaced inflation over the long term.
2. Diversify your income streams. Rental income, dividends, and side ventures can add cash flow you might not otherwise have in retirement, beyond your normal portfolio.
3. Review and adjust regularly. Inflation isn’t steady — it rises and falls year over year, with some years higher than others. It’s important to talk with your adviser about where your finances stand and whether any changes are needed to keep pace.

Inflation isn’t going away, but with the right plan you can stay ahead of it and protect your buying power and your future. Visit our website for a free Retirement Readiness Checkup, and let’s build a plan that works for any economy. Yesterday was the best time to invest; today is the next best.