Some Retirees Are Falling Behind

Jun 1, 2021 | Economy, Investing, Retirement

On the Trey Ware Show, Karl discussed how inflation is playing an impact on retirees. They are not living their full life given their increasing cost of living.

Trey Ware:

Gsa.com show. We’re getting the word now the US economy is poised to grow at a fastest pace since 1984. Unprecedented levels of government stimulus now in the economy, it looks like the GDP is going to grow 6.9% in 2021, that’s the biggest increase since 1984 is what they are saying. So let’s go to Karl Eggerss, creatingricherlives.com. Good morning to you, Karl.

Karl Eggersss:

Trey, how are you doing?

Trey Ware:

I’m doing great, man. So tell us what, what is going on with our money this week? What do you think?

Karl Eggersss:

Yeah. You know, I think you mentioned that GDP. I mean, I’ve used the analogy of you drop a ball off of a building, it’s going to bounce pretty hard, that first bounce. And I think that’s the period we’re in right now. I think you’re seeing things that I think will taper off in the next few months and I don’t mean get bad, I just mean slow down a bit. So some of this inflation we’ve been seeing, it’s not sustainable. And I still think we’re in a period of rising prices, but not as fast as we’ve been seeing. I really think the thing that people should be thinking about, and that’s not being talked about a ton right now is remember the secure act was passed a couple of years ago?

Karl Eggersss:

Well, there’s a new one that’s about to come, secure act 2.0, people are calling it and that’s really going to help our listeners in terms of their retirement. There’s a lot of different things in there in terms of being able to put more money in your 401k, especially when you’re over 50. It reduces the amount you have to take out of your IRA. When you’re 72, it’s going to phase up to 75. So there’s a lot of benefits for retirement. But my point is it’s going to make things a lot more complex in the next year. I think in the next 12 to 24 months, the financial planning, the tax planning and the estate planning are going to get extremely complex. And so our listeners need to be on the lookout for that and potentially get some help.

Trey Ware:

So one of the things you really help people with is their retirement plan because of investing in all that can lean in that direction. Do you have concerns about people who are currently on a fixed income or who soon will be on a fixed income, dealing with the inflation that’s going on eating into their fixed income and eventually, maybe some of them have to go back to work?

Karl Eggersss:

Yeah no, it’s a good point because really, since 2008, people have literally been fallen behind if they left their money in money markets and CDs, or even in the money market in their 401ks. You used to be able to lead your money in those things and at least keep up with inflation because interest rates were reasonable. Now what’s happened is interest rates are so low that they’re literally below the amount of inflation. So people are falling behind. So either A, they reduce their lifestyle or B, they have to go back to work or C, they end up having to invest in things that maybe they’re not comfortable with.

Karl Eggersss:

And so I think you’re seeing some people forced into the stock market as opposed to taking a balanced approach. But you’re right, you have to invest your money in things that are going to beat inflation. Otherwise, you’re going to fall behind. And I’ve seen it before where clients literally, they start reducing their fun. I mean, in retirement when you’re supposed to be enjoying yourself and instead they’re hunkering down and they’re watching their money closer than they ever were. And it’s not really fun. And that’s not really what they….

Trey Ware:

Some of them were having to go back to work because what they plan for and the amount of money that they plan to have and what have you is getting eaten up by the current inflation rate. It is extremely high what we’re seeing right now happening. I don’t know if it continues to go this way, or if it does start to edge off like you were talking about. But I know people that plan for retirement, they began retirement just a handful of years ago and now they’re having to think about other ways of income because it’s just not the same. When you’re talking about, I know a guy the other day went to buy a sheet of plywood that last year at this time it was about $9.97. This is not the top of the line plywood he was looking at. It’s now over $50 for that same sheet this year.

Karl Eggersss:

Yeah. Well guess what’s going to happen? I mean, and this is why we do think it’s going to slow down a bit is because what’s going to happen is people that were we’re planning to buy that plywood, planning to build that deck, they’re going to stop. Keep in mind, I’m not saying inflation is going to grind to a halt and it’s not going to be there, it’s just going to slow down from current levels. It’s always going to be an issue and it’s been an issue for a long time and it’s something you have to address when you’re thinking about going into retirement, you better plan for your expenses to go up. Do you have enough money for that? A lot of people think whatever I’m spending today, [crosstalk 00:04:41] in retirement. Can’t do it that way.

Trey Ware:

Nope. Doesn’t happen that way. Karl Eggerss, creatingricherlives.com. Thank you, Karl. He’s usually here on Monday, but of course we weren’t here yesterday. But we will talk to him next Monday, right here on KTSA as we talk about your money in the markets and what have you.

 

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