This week I’m talking about inflation - are we in for higher inflation in the coming years? And if so, what does that mean for you and your retirement? 

Yesterday, I talked about whether or not you should worry about higher inflation. And my best answer is probably not right now. But that doesn’t mean that you shouldn’t understand how to protect yourself against higher inflation. 

I think higher inflation, even problematic inflation is a real possibility due to our skyrocketing national debt and the lack of discipline of our elected officials on both sides to properly deal with it.

So whether higher inflation is just around the corner, or years down the road, what can you do to protect yourself from higher inflation? 

The key principle to remember here is that what you invest in, must have growth potential, so that your dollars will grow over time to keep up with inflation. Holding cash, savings, money market accounts, CDs, and low-yielding bonds aren’t good protectors against higher inflation, because the growth rate usually won’t be enough to keep pace with inflation.

That doesn’t mean you shouldn’t own any bonds, CDs, or cash, but owning too much of these assets will cause your standard of living to go down over time. 

So here are the types of investments you’ll want to make sure you own to protect yourself from higher inflation: 

• I’ll just start off with the most obvious and well-known protection against inflation - gold and other precious metals. But gold’s ability to protect you against higher inflation is limited, because owning too much gold comes with it’s own set of problems. 
• A better protector against inflation is your stock portfolio. Yes, just by maintaining a meaningful % of stocks in your portfolio, you can protect yourself against inflation, since stock market returns outpace inflation by a wide margin over time. 
• TIPS or Treasury Inflation-Protected Securities are US Govt bonds that have an inflation protection component to them. 
• Real estate is another way to protect against higher inflation, especially if you own income-producing rental properties, because you’ll likely be able to increase rent in an inflationary environment, which will lessen the blow of inflation on your bottom line. 

Lastly, the prospect of higher inflation in retirement should prompt you to get aggressive in paying down your debt, so you’re not stuck with a mortgage, car payments, etc. when the cost of groceries and other necessities go up. The more flexibility you have with your spending in retirement, the less inflation will be a problem for you in retirement. 

That’s it for today. Thanks for listening. My name is Ashley Micciche and this is the One Minute Retirement Tip.

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