Inflation is a Lagging Indicator | What Does That Mean And How Does It Affect Your Retirement Plan

 

Glad you’re with us today for the retirement income show with Troy Sharpe, the CEO and founder of Oak Harvest Financial Group. I’m Mark Elliott. The office is located at 920 Memorial City Way, right of I10 and Bunker Hill.

You can always go to the website to find out more: OakHarvestFinancialGroup.com. There’s just a lot of information on the website. OakHarvestFinancialGroup.com. And of course, you can always check out Troy on YouTube to search for Troy Sharpe and Oak Harvest.There’s over 100 videos on the YouTube channel. You subscribe, but there is no fee. (On) YouTube, search for Troy Sharpe and Oak Harvest.

Troy, I remember–I don’t know, maybe this was a couple of months ago when you said, “you know what, I think inflation is going to be overblown,” that “I don’t think it’s going to be a long term scenario”. And certainly Jerome Powell, the US Federal Reserve Chair, backed you up. He calls it transitory, a temporary situation. Well, the inflation rate in March was 2.6%, in April 4.2%, May 5%, June 5.4%. Are you still right, along with Jerome Powell, thinking that inflation is not a huge factor, other than inflation 20 years down the road? We know things are going to cost more. We need to have increasing income, I suppose, when it comes to our retirement.

Yes, definitely. Again, all of these reports that are coming out now, they’re lagging indicators. They’re not leading indicators. Leading indicators tell us what things are going to be like, most likely in 3 months, 6 months and 12 months down the road. Lagging indicators tell us what things were a month ago, 3 months ago, 6 months ago. You have this entire dynamic coming out of COVID to where you had the industries that benefited from COVID, and you have industries that were extremely damaged from COVID.

We also had supply chain disruptions. We’ve had pricing disruptions essentially because of the wackiness, so to speak, for lack of a better word, with what was going on economically or the economic chaos caused by COVID. When you have industries that were damaged by COVID and supply chains being disrupted and services being unable to be provided, you have a greater demand and a lesser supply. This is Economics 101. You’re going to have pricing pressure. You’re going to see inflation in those particular parts of the economy. Now, other dynamics play into it, of course. It’s not always that simple. But the truth of the matter is, when we look at a lot of other services and areas of the economy, we see deflation. We see prices coming down. So long term– when I say long term here, I’m talking 10, 20 years. There are absolutely concerns long term about the amount of money that we’re printing, whether it’s Congress, through the stimulus bills that they’re putting in place, or the Federal Reserve by simply digitizing assets and then buying securities. Those are longer term concerns. They’re mitigated somewhat by the fact that the U.S. dollar is the world’s reserve currency. So it’s not as if the euro is the world’s reserve currency and everything that we print is pegged to the euro.

In that instance, the more and more that we printed, the less valuable it would become in relation to the euro. It’s the exact opposite. Every other currency in the world is pegged to the dollar. So the fact that the dollar is the world’s reserve currency, does mitigate the long term risks of inflation to some extent. But ultimately, we do have to pay this money back. We do have to pay it back to ourselves, a large portion of this.

Now, some of you might be saying, what do you mean we have to pay it back to ourselves?

Well, we don’t borrow from China for the most part. China will buy some Treasury bonds, but they’ve been selling them as of late. We owe– we are our own largest debtor. Last time I checked, we owed ourselves somewhere around $20-24 trillion, somewhere in that range. And the national debt, I believe, is about $29 trillion right now. So only a small percentage of our overall debt is owed to other countries. The Federal Reserve prints money, puts it into the economy and puts it into the Treasury, the Treasury has to pay back the Federal Reserve.

There are few ways around this. They can increase taxes or they can inflate our way out of the debt. But ultimately bringing this back to retirement. What does this mean for you and your retirement?

We need 2 primary ways to combat inflation and retirement.

The first one, we need to plan on having multiple streams of income in retirement coming from multiple different places. We need that income to be increasing over time, not remaining stagnant, not going down. Increasing income, kind of straight forward. It’s not rocket science there.

But the second way, which I don’t think a lot of people look at, is let’s say we do have or let’s say we don’t have the ability to create multiple streams of income. Let’s say we don’t have the ability to invest in different buckets to create a laddered or structured income plan in retirement, where we have increasing income over the next 25 years. One way to have more purchasing power is to be tax efficient with our income streams. The worst thing you can do is have all of your money inside this retirement account and you’re forced to get your income from that retirement account and taxes go up in the future. So now not only is inflation eroding your purchasing power, but also the taxman cometh and erodes your purchasing power because you get to keep less dollars coming out of your retirement account.

1-800-822-6434. This is The Retirement Income Show. I’m Troy Sharpe.

When we look at one of those two ways, what we do for our clients on the investment side is we build an investment plan that is focused on generating income, but not just income today. Again, multiple streams of income. We’d like to see increasing income throughout retirement. But then we bring that investment plan and that income plan and we tie it into a tax plan. We’re going to come at this sucker from two different directions.

It’s not just we want to protect your assets from the volatility of the market, but we do need some money out there because we need growth. We need to participate in capitalism. We need to participate in appreciating markets. But we need to do so within a plan that manages the risk of our investments. So that’s step one.

Step two. We need to generate income. We need to have a plan for increasing income throughout our retirement.

Step three. We’re going to wrap all of that inside of a tax plan.

And when people come to me and they say, “Troy, one of the best things I’ve ever done is come aboard as a client, because besides what you guys do on the investment side, and Chris and James and the investment team, and what you’ve done with the income plan and how I know that I’m going to pay less taxes because we have a plan to do so.” When they tell me, “Troy, the reason I’m here is because this is no longer a big black cloud blocking my future and causing me and my wife anxiety and fear and uncertainty. Now, when I lay my head on the pillow and I look at my wife and I kiss her goodnight, we know that we’re in a much better position because we have a plan. We have risk being managed. We know where our income is coming from. And we know that we’re going to pay less tax in retirement because of the tax plan that we have in place.” That is a powerful feeling.

That’s what Oak Harvest Retirement Process does. In order to get to that point, though, you have to pick up the phone, you have to give us a call, and you have to become a client. It’s that simple. We do this for everyone who comes aboard. We do have a minimum of $500,000 and we do not work with everyone. The primary qualification to work with us is you need to be serious about retirement as we are. If you’re the type of person that schedules appointments and then cancels appointments and then reschedules and then cancels.We operate at a high level here. Everyone at this firm. We have 26 people. We don’t have employees that act like that.

We don’t want clients that act like that, and we’re not going to act like that for you. So if we’re a good fit and you’re serious about retirement, we’re serious about doing the planning, doing the management management of risk and the investments, building an income plan, building a tax plan.

But you have to give us a call. You have to pick up the phone. 1-800-822-6434. If you’re calling on the weekends, you’re going to leave a message. Frank Mason, guy has been with me for– this is his 11th year. Frank’s going to call you back on Monday. Get to know a little bit about you and your situation. Then he’s going to schedule a consultation with one of our advisors. 1-800-822-6434. Visit the YouTube channel search. Oak Harvest Financial Group on YouTube. Check out the videos. Check out the website. Give us a call. Let’s sit down and see if we can be of help to your retirement.

You know what? It really is interesting, Troy, that you bring up the fact $29 trillion in debt as a nation. And I think a lot of people figured that $20 trillion of that was owed to China. Actually, it’s a little bit over. It’s like $1.1 trillion we owe to China. Japan, it’s right around a trillion dollars. India, now, we owe them $216 billion. So it’s really kind of interesting. I think we all thought we were lock, stock and debt to China. And we are, I suppose, to a degree, but there’s a lot of moving parts. So when you think about inflation and you think about, okay, when I retire, I need $5,000 a month, I need $10,000 a month, I’m in retirement for 20 years. Things basically doubled in that 20-24 year time span. How do we have increasing income? That’s a big part of the Oak Harvest Retirement Process process.

We’re going to talk about that when we come back. Stay with us. This is The Retirement Income Show with Troy Sharpe, the CEO and founder of Oak Harvest Financial Group.