Protecting Your Wealth In Tough Times

Since 2008, pundits are screaming – “Inflation is coming!” They are getting louder; do we scoff at the warnings, or take heed? What if they are right? If we take precautions, what harm can we do to our life savings if it doesn’t happen?

Baby boomers worked hard and played by the rules. Most are past their peak earning years and retired. Retirees generally see the largest inflation loss of wealth; they get poorer as they no longer have wages that rise with the tide.

During the Carter years, baby boomers experienced high inflation and Fed Chairman Volcker instituted 20% interest rates while the Fed tried to get things under control. While history is no guarantee of future results, it sure rhymes. What can we learn from our past experiences? supplies the inflation information for us:

Inflation information table

The Inflation Calculator shows us the accumulated inflation was 59.8%.

Inflation Calculator

My parents were ready to retire. They were children of the Great Depression, afraid of the stock market, preferring to invest their life savings in Certificates of Deposit. If they bought a $100,000, 5-year, 6% CD on 1/1/77 they would have received $6,000 annually in interest – before taxes. Their CD income did not keep up with inflation, and their returned principal lost almost 60% in buying power.

For those living on a fixed income, that means downsizing, cutting expenses, and possibly dramatic changes in lifestyle.

The catastrophic potential consequences always warrant evaluation of high inflation warnings. While me may not know exactly when it could happen – are legitimate storm clouds brewing?

Could history repeat itself?

We recently compared the Volcker inflation years to recent times.

FRED Chart - Inflation, consumer prices for the USA

The double-digit inflation spikes in 1975 & 1980 prompted Fed Chairman Volcker to dramatically raise interest rates.

Since then, the Bureau of Labor Statistics has constantly gerrymandered its numbers. If the price of steak goes up, they substitute hamburger, with the goal of underreporting true inflation to the public.

Each lower-priced substitution represents a downgrade in lifestyle, not an honest reporting of increasing costs for the SAME basket of goods and services over time.

John Williams at Shadowstats calculates inflation using the same method that was used in the 1980s. The numbers rhyme with what Volcker was faced with.

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For more detailed information on how to get the job done, you can download my FREE report: 10 Easy Steps To The Ultimate Worry-Free Retirement Plan – by clicking  more

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