Is Inflation Something That You Need To Be Worried About in 2022?

Is this headline News or Noise?

Hey, I’m Chris Perras, Chief Investment Officer with Oak Harvest Financial Group. This is our investment team’s new mid-week release when we examine a news item, headline, or story making the rounds from publicly available sources and ask, “Is it News or Noise?”

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So here we go..

So everywhere you turn today, the TV, internet social media, and investment newsletters have the same stories. Stories of inflation. Stories of higher prices. Higher prices for gasoline, higher prices for food. Higher labor costs and higher rents and housing. There is a myriad of reasons for the recent upturn in overall prices the last 12 months which I am not going to rehash here. A great deal of these stories is noise in our team’s opinion due to their likely transitory nature or relatively small affect on investors and retirees cash flows.

However, there are two areas of inflation that are arising in 2022 that should be a concern for many retirees in 2022 because both areas are 1) already significant retiree expenditures that require cash flows and 2) generally hidden from view until the bill comes due. No, we are not talking brisket and baby back rib pricing my friends. Those two areas? Healthcare expenses by way of

Medicare costs increases and your cash outflows for real estate taxes, if you own your home.

First, it looks like the standard premium for Medicare part B will be a little over $170 per month instead of the earlier estimate of about $158, and that’s up from $148.50 this year. So instead of a 6.7% increase, its looking closer to 14.5% year over year. And that’s almost $22 per month of additional ongoing health expenses and that’s real money over the course of a year.

Additionally, the deductible for Part B is rising to $233. That’s also up almost 15% year to year and roughly $30 higher.

The second hidden, major cash outflow that is coming for many retirees in 2022 is likely much higher net cash outlays for real estate taxes particularly for many living here in Texas in hot property markets like Austin and Dallas.  While Texas is viewed as a low-tax state, the dirty secret is that our property tax rates are among the highest in the nation. In fact, only places like Connecticut, Illinois, and New Jersey have higher rates than ours.

And while our state legislature and local politicians have done a few things to optically try to help lower your future real estate tax burden by passing a few “relief bills and measures”, including using some surplus state taxes to reduce your bills for 2022 and 2023, and or capping the year over year increase you pay at some percentage of say 6-10%. Regardless of these measures, given the hot residential real estate markets in Texas and around the country, I would expect most homeowners will be looking at a max increase in their property tax bill for 2022. Whatever that max percentage is allowed by law. Given many real estate values are up between say 5% on the low end, and almost 40%+ on the high end in Austin, and this is one of most people’s largest annual expenses and cash outlay, it’s best to start planning and budgeting for it now, well in advance.

Planning for that additional expense might mean, saving a little more by not purchasing some of your greed’s early in 2022. Or maybe its thinking about getting a part-time job if you are getting bored of playing golf, traveling, or doing yardwork. Or perhaps it might just mean harvesting some investment gains early in the year when the opportunity arises and keeping a higher cash balance for the year instead of waiting until the bill is due. Sorry, billionaire Ray Dalio of Bridgewater, you will never, ever, convince me “cash is trash” for any retiree or anyone else on a budget.

We can’t all be billionaires, not worrying about our needs, and only focusing our greed’s.  Viewers, unfortunately, higher Medicare costs and real estate taxes in 2022 is news and should be planned for.

News or Noise? NEWS! 

Give us a call here at Oak Harvest and ask to speak to one of our advisors.  Let us help you craft a financial plan that meets your retirement goals and needs first, and your greed’s second. Call us at (877) 896-0040 we are here to help you on your financial journey into and throughout your retirement years.

https://www-cnbc-com.cdn.ampproject.org/c/s/www.cnbc.com/amp/2021/11/12/medicare-standard-part-b-premiums-for-2022-jump-by-14point5percent-.html
https://woai.iheart.com/content/2019-05-10-texas-house-votes-to-cut-property-taxes-in-half-in-2022/
https://www.houstonpublicmedia.org/articles/news/politics/2021/09/21/408921/property-tax-relief-not-yet-on-special-session-agenda-appears-on-fast-track-in-senate/

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