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.
Billy and Akaisha Kaderli
What is inflation?
Inflation is when too much money is competing for a finite number of goods. This
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 6.0% year-over-year. The producer price
index (PPI) came in at 4.59% 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
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.
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 a 1.60% yield, and DVY, IShares Select Dividend, yielding 3.63%.
are ETF’s (exchange traded funds) that increase in value over time outpacing inflation.
Full disclosure: We own them
Some people believe that gold is the better metal to keep up with inflation.
is a 10-year chart showing the returns of GLD, the largest gold ETF, and both VTI
Chart showing GLD, VTI
and DVY performance
As you can see there is no comparison.
For the last ten years inflation has averaged roughly 1.88% 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.
About the Authors
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.
Retire Early Lifestyle Blog
About Billy & Akaisha