What is Inflation and What Causes It?

Author: Laura Stover
Published: Fri 22 Apr 2022
Episode Link: https://redefiningwealth.info/101-what-is-inflation-and-what-causes-it/

Prices have been steadily climbing for some time now. What is driving this unprecedented increase in inflation and how can you insulate your financial future from these black swan events? Many retirees are aware of risk and volatility within the market, but inflation itself can be a silent killer that lowers your future buying power when it comes to things like gas, groceries, and health care costs.

We have recently hit a 40-year high with inflation at 8.5%. Most experts still expect us to be facing high inflation rates a year from now, some are even predicting the possibility of a recession. Unpacking inflation and how it can impact your investments and retirement future is essential. If you aren’t incorporating this into your future income plan you may find yourself taking too much risk on in the future to make up for those losses. Bonds and fixed income are also subject to the risk of inflation as they are inversely related to interest rates and an increase in rates can result in a drop. So, how do we make sure our portfolio has the right amount of balance?

We recommend really analyzing your budget and understanding what you are getting for your dollar. This allows you to move into a diversified investment strategy that can garner you a return that will make your budget work during an inflationary period. If you are invested in bonds, think about asking your advisor about the various tools you can use to protect your plan. Find the best rotation of investment tools fit for you. On today’s episode, we’ll break down inflation, its impact on your money, and how you can protect yourself now and in the future.

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What is Inflation and What Causes It?