There was an article in the Dispatch today August 24, 2008 talking about "Who's helping savers fight inflation"
The answer is it's not the banks or money markets. The article states the average inflation rate is close to 5%. More updated figures actually show that for the past 12 months the rate is actually 9.8%. This ties into some other blog topic I wrote about on August 21st. Bank CD rates were averaging 3.6% and average bank saving rates are 0.37% that is actually down from the 0.46% rate of last summer. It never ceases to amaze me that people will give banks their money for that poor a rate of return. You might as well burn 6-9% of your money per year if you insist on keeping large amounts of money in a bank. FDIC insurance up to limits exists but what about inflation risk? The comment I made about burning money is real and it represents the inflation risk! FDIC Insurancedoes not protect against inflation risk. That is your responsibility together with a good financial advisor who understands and endorses safe money strategies to PROTECT YOUR MONEY.
Almost no one is speaking out for the savers. Greg McBride an analyst for BankRate.com was quoted as saying "for the past 12 months there has been a double whammy for savers as interest rates have fallen and inflation has increased"
He is absolutely right. There are alternatives for smart savers or investors! It is not possible to properly plan for or take care of your retirement at these rates!!
How can we help you?
website
www.columbusfinancialplaanningpros.com
Showing posts with label Inflation. Show all posts
Showing posts with label Inflation. Show all posts
Sunday, August 24, 2008
Thursday, August 21, 2008
How To Minimize the Damage From A 9.8% Inflation Rate
Over the last 12 months the USA inflation rate is up 9.8%. Investing at a bank with an average yield of 1-4% means that before taxes you have a net negative return of 5.8-8.8%. Your buying power has actually decreased by that 5.8-8.8%. To make it worse you are getting taxed on the rate paid by the bank at a 15-33% rate even if you leave the money in the bank account. OUCH!! To asses the damage start with your earning rate subtract the tax rate you pay, then subtract the 9.8% inflation rate. This year that number looks like it will be a negative number for almost everyone. Minimize the damage! Protect your principal! Some years just staying even is a great place to be. Its better than a 20-30% market loss! Efficient money management is even more important in a bad year than it is in a good year. The impact on most people from 2001-2002 took 5-6 years to recover.
Let's repeat it again. Protect your Principal! Balance your assets with at least some no risk financial products. We can even create a lifetime income source that is not subject to market risk.
There has to be a better way! There is a better way! As long as the inflation rate stay this high there is no safe way to beat inflation and remain risk free. You owe it to yourself to get the best rate of return you can and maintain the highest degree of safety that you can in the process.
A 7.2% guaranteed rate of increase in an Income Account value with the potential of a higher rate of return depending on economic conditions seems to be about the best combination of risk-reward ratio I have seen in the last year. Hopefully the gas prices and commodity prices will continue to ease a little bit and the inflation rate for the next 12 months will be more moderate. Perhaps we will get back to a 2-3% increase in the Consumer Price Index (CPI). At that level you can actually grow your assets but until then most people will do well just to minimize the damage to their assets.
Contact us to arrange a no fee initial consultation. We can help you protect yourself in the bad years and take advantage of the good years all with little to no risk. If this is a philosophy that appeals to you we should certainly talk. Business owners and individuals can all benefit from these strategies. We can structure safer money planning into your retirement plans.
We can not help everyone, but how can we help you?
www.columbusfinancialplanningpros.com
Let's repeat it again. Protect your Principal! Balance your assets with at least some no risk financial products. We can even create a lifetime income source that is not subject to market risk.
There has to be a better way! There is a better way! As long as the inflation rate stay this high there is no safe way to beat inflation and remain risk free. You owe it to yourself to get the best rate of return you can and maintain the highest degree of safety that you can in the process.
A 7.2% guaranteed rate of increase in an Income Account value with the potential of a higher rate of return depending on economic conditions seems to be about the best combination of risk-reward ratio I have seen in the last year. Hopefully the gas prices and commodity prices will continue to ease a little bit and the inflation rate for the next 12 months will be more moderate. Perhaps we will get back to a 2-3% increase in the Consumer Price Index (CPI). At that level you can actually grow your assets but until then most people will do well just to minimize the damage to their assets.
Contact us to arrange a no fee initial consultation. We can help you protect yourself in the bad years and take advantage of the good years all with little to no risk. If this is a philosophy that appeals to you we should certainly talk. Business owners and individuals can all benefit from these strategies. We can structure safer money planning into your retirement plans.
We can not help everyone, but how can we help you?
www.columbusfinancialplanningpros.com
Monday, July 21, 2008
Can you still retire
In friday July 11 issue of USA Today there was a good article about retirement written by Kathy Chu. The article talks about retirement and determining if your assets are adequate to last as long as you live in retirement. Although it is a good article thare are some key points missing and we will get to them in this blog entry. Kathy makes a number of excellent points about how important the early years are in permitting the asset base to grow and the terrible detrimental effect a couple of bad early years can have on your ability to have enough money to get through many years of retirement. She also shares the traditional rule of thumb that says take out no more than 4-5% of the assests per year if you want to maximize the length of time the assets will remain. She also talks about adjustments to withdrawals in the rule of thumb during one or more bad years.
It talks about postponing retirement if your assets need more time to grow and postponing Social security to get some additional monthly income. She adds that it is important to keep assets positioned in such a way that you have the ability to out perform the inflation rate. there are a number of references to food prices, gas prices, energy costs and healthcare costs. We all know the impact that each of those is having on our budget.
She also mentions diversification of assets and asset allocation strategies. All of these are good things but nowhere does she talk about the single thing that a boomer or retiree can do that will guarantee that the retirement asset pool will never run out as long as you live. She acknowledges that inflation adjusted pensions like Social Security are a good thing but she fails to tell the readers that they can create that for themselves with their own assets. This is something everyone with assets should be doing with at least a significant percentage of their retirement assets and their general assets.
The key points in the strategy we recommend are the following. Position a majority of your assets where there is NO risk of market loss due to economic market turbulence. Lock in each years gains protecting them from downturns in subsequent years. When possible shelter your assets during the growth mode from current income taxes. Deferred income taxes allow you principal and your previous years earning growth to continue to grow without creating a tax liability that you have to pay off when you file your annual taxes. You need to insure that your assets have the opportunity to grow at a rate that can beat the rate of inflation consistently. Remember that this year the Consumer Price Index (CPI) has risen at a rate of 5%. This is the highest CPI adjustment in a number of years. The products we are talking about do usually have early surrender charges on a sliding scale. These can be 10-15% but you have control over when you take the money out. Many clients never have to pay a surrender charge at all. By timing your withdrawals to the surrender charge free withdrawal schedule you can almost always avoid paying any fees at all! You are in control! Finally do all of these things usually without a collection of annual fees and charges that typically run 2% or more of total assets per year. Remember that if you hold those types of assets for 20 or 30 years the fees continue to add up and may have generated total fees that cost you an amount equal to 40-60% of your initial contribution. These fees certainly will reduce the asset value that you get to keep or walk away with.
What single product can and has consistently met all of these criteria? The answer isn't found at your bank and isn't generally offered through your local broker. There is only one type of product that offers all of the positive things discussed and doesn't have the annual fees and charges listed above. The products we are talking about are long term saving vehicles. Only Fixed indexed Annuities do all of the positive things listed above and usually, avoid the annual fees on the downside. When you do add a rider to a fixed Indexed Annuity the maximum rider charge is usually 1/2 of 1% or less. There are currently products that will guarantee an increase in Income Account Value of up to 7.2% per year. This doubles your income every 10 years and quadruples your assets in 20 years. When you do decide to begin withdrawing income from the product you can create a Lifetime Income Stream that you cannot outlive.
We can help!
polarisfinancialservices@gmail.com
www.columbusfinancialplanningpros.com
I
It talks about postponing retirement if your assets need more time to grow and postponing Social security to get some additional monthly income. She adds that it is important to keep assets positioned in such a way that you have the ability to out perform the inflation rate. there are a number of references to food prices, gas prices, energy costs and healthcare costs. We all know the impact that each of those is having on our budget.
She also mentions diversification of assets and asset allocation strategies. All of these are good things but nowhere does she talk about the single thing that a boomer or retiree can do that will guarantee that the retirement asset pool will never run out as long as you live. She acknowledges that inflation adjusted pensions like Social Security are a good thing but she fails to tell the readers that they can create that for themselves with their own assets. This is something everyone with assets should be doing with at least a significant percentage of their retirement assets and their general assets.
The key points in the strategy we recommend are the following. Position a majority of your assets where there is NO risk of market loss due to economic market turbulence. Lock in each years gains protecting them from downturns in subsequent years. When possible shelter your assets during the growth mode from current income taxes. Deferred income taxes allow you principal and your previous years earning growth to continue to grow without creating a tax liability that you have to pay off when you file your annual taxes. You need to insure that your assets have the opportunity to grow at a rate that can beat the rate of inflation consistently. Remember that this year the Consumer Price Index (CPI) has risen at a rate of 5%. This is the highest CPI adjustment in a number of years. The products we are talking about do usually have early surrender charges on a sliding scale. These can be 10-15% but you have control over when you take the money out. Many clients never have to pay a surrender charge at all. By timing your withdrawals to the surrender charge free withdrawal schedule you can almost always avoid paying any fees at all! You are in control! Finally do all of these things usually without a collection of annual fees and charges that typically run 2% or more of total assets per year. Remember that if you hold those types of assets for 20 or 30 years the fees continue to add up and may have generated total fees that cost you an amount equal to 40-60% of your initial contribution. These fees certainly will reduce the asset value that you get to keep or walk away with.
What single product can and has consistently met all of these criteria? The answer isn't found at your bank and isn't generally offered through your local broker. There is only one type of product that offers all of the positive things discussed and doesn't have the annual fees and charges listed above. The products we are talking about are long term saving vehicles. Only Fixed indexed Annuities do all of the positive things listed above and usually, avoid the annual fees on the downside. When you do add a rider to a fixed Indexed Annuity the maximum rider charge is usually 1/2 of 1% or less. There are currently products that will guarantee an increase in Income Account Value of up to 7.2% per year. This doubles your income every 10 years and quadruples your assets in 20 years. When you do decide to begin withdrawing income from the product you can create a Lifetime Income Stream that you cannot outlive.
We can help!
polarisfinancialservices@gmail.com
www.columbusfinancialplanningpros.com
I
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