Retire Early Lifestyle
Retirement; like your parents, but way cooler

In 1991 Billy and Akaisha Kaderli retired at the age of 38. Now, into their 4th decade of this financially independent lifestyle, they invite you to take advantage of their wisdom and experience.

How to Beat Inflation in Retirement

Billy and Akaisha Kaderli

Billy Kaderli

What is inflation?

Inflation is when too much money is competing for a finite number of goods. This causes a general increase in prices and a fall in the purchasing value of money.

The US Real-Estate market is a prime example, and we have all witnessed the rising home values. Translate this to food and energy, and this is the effect we are feeling today.

Current inflation numbers

Recent inflation numbers came in at 3.0% year-over-year. The producer price index (PPI) came in at 2.6% which means it is costing more for the producers to manufacture products.

These increases get passed on to you and me, the consumers, and we are going to be feeling these increases now and on into the future.

Like when you go to the doctor and you gained 10 lbs since your last visit. A year later you return and this time you gained another 4 lbs. Just because you only gained 4 lbs as compared to 10 lbs doesn't mean that you are doing better.  Inflation is a cumulative effect.

How can you protect yourselves in retirement?

Perhaps you are living on a fixed income such as Social Security. Your annual Social Security adjustment doesn’t keep up with grocery and fuel costs, thus, you are slipping backwards.

This is not a good position to be in.

One answer is to own equities.

Stocks are the best inflation hedge out there. These companies are in business to stay in business and they are not going absorb the costs increases and go broke. Instead, they pass it on to the consumer - which raises their prices and increases the company’s revenue. If the company is managed well, this increase in revenue will drop to their bottom line showing higher earnings.

These increases in earnings also translate into higher stock prices and you, being an owner of the stock, participate in the growth. Many companies will also raise their dividends which also creates a win-win for you.

Which stocks to buy?

So, all is not lost, but how do you know which stocks to own?

Our recommendation is to keep things simple and own VTI, Vanguard Total Market Index with a1.35% yield, and VGT, Vanguard Information Technology Index, yielding 0.62%. Both are ETF’s (exchange traded funds) that increase in value over time outpacing inflation. Full disclosure: We own them both.

Some people believe that gold is the better metal to keep up with inflation.

Below is a 10-year chart showing the returns of GLD, the largest gold ETF, and both VTI and VGT.

10 year Chart showing GLD, VTI and VGT performance

As you can see there is no comparison.

For the last ten years inflation has averaged roughly 3.04% per year.

Where it is going to be in another ten years is anyone’s guess, but equities are your best assets to own to protect yourself and hedge against inflation. 

For more on Retirement Topics, click here and here and don't forget to signup for our free Newsletter.

Retire Early Lifestyle appeals to a different kind of person – the person who prizes their independence, values their time, and who doesn’t want to mindlessly follow the crowd.

HOME   Book Store

Retire Early Lifestyle Blog      About Billy & Akaisha Kaderli      Press     Contact     20 Questions     Preferred Links    

Retirement     Country Info     Retiree Interviews      Commentary     REL Videos