Transitory or not, inflation is here… how it’s hurting retirees worse than younger investors… a special “income” focused live event with Louis Navellier
For a while now, the Fed has been telling us that inflation will be transitory.
But how long is “transitory”?
After all, the word simply means “not permanent.”
Two weeks ago, Federal Reserve Chairman Jay Powell admitted to the possibility that this transitory inflation could persist.
From Powell:
…we don’t in any way dismiss the chance that it can work out that this goes on longer than expected.
Various Fed members have echoed this concern.
Atlanta Fed President Raphael Bostic recently said “temporary is going to be a little longer than we expected initially.”
Meanwhile, Michelle Bowman, one of the Fed’s Washington-based governors, said, “these upward price pressures may ease as the bottlenecks are worked out, but it could take some time.”
“Some time.”
In the meantime, this inflation is impacting your wallet…but it’s not hitting everyone the same.
***Among the groups most impacted are retirees and those about to enter retirement
With fixed budgets, many retirees aren’t prepared for the 50% surge in gas prices year-over-year, or the airline fares up 25%, or grocery prices up 5%.
On this last note, that 5% average grocery hike masks some of the more specific price increases going on when you hit the supermarket.
From WINK-News in Florida:
Compared to early- to -mid-2020, you’re now paying 18.7% more for seafood. There has been a 7.5% increase for fruit, 5.1% for fresh meat, 3.1% for vegetables, 2.4% for cheese and 1.1% for eggs.
Prices only continue to increase because demand is up, shipping is slow and workers are in seriously short supply.
These price increases are impacting how far retiree-dollars go at restaurants as well. In recent weeks, we’ve seen Chipotle hike prices by about 4%, while Red Robin and Cracker Barrel have increased them roughly 3%.
From Business Insider:
Consumer prices are at a 13-year-high, but they’re showing no signs of flagging. Executives from General Mills and Campbell Soup Company have warned they may be forced to raise prices further if supply-chain issues continue…
As companies continue to hike prices, experts say prices will only even out when the shipping crisis abates, but no one knows how long the upheaval will last.
With this as our backdrop, today, let’s look at a solution from legendary growth investor, Louis Navellier.
It’s a quantitative market approach he’s been developing that’s the focus of a special, live event Louis is holding tonight at 7PM ET called the Accelerated Income Project 2021.
From Louis:
Thanks to huge recent advances in artificial intelligence (AI) and other computing technologies, I set out on a particular approach to income investing that can put thousands of dollars of cash into the hands of everyday Americans quickly and consistently.
I call it my Accelerated Income Project 2021…
The presentation I’ll detail could hold the key to helping solve America’s retirement crisis and help supplement income while America gets back to work.
Today, let’s dig into more details on inflation, why the traditional defenses against it aren’t great for retirees today, and how Louis’ approach can help fix the problem.
Let’s jump in.
***This shock of inflation is hurting retirees far more than younger people on average
The Bureau of Labor Statistics tracks the impact of inflation on retirees. It does this through an index known as the CPI-E.
This “retiree” index takes the broader consumer-price index and adapts it to reflect the difference in how retirees spend money compared with working adults.
So, what is this CPI-E showing about how this inflation is impacting retirees?
From Barrons:
Generally, inflation has hit retirees harder than the general public because of healthcare and shelter…
…the cost-of-living adjustments [COLA] people get annually in their Social Security checks haven’t kept up with the way retirees spend…
That’s in part because Social Security COLAs are established each year based on CPI-W, which measures the impact of inflation on worker prices. The 2021 COLA was based on the distressed 2020 pandemic economy, so retirees got a 1.3% bump to cover prices that the broad CPI recently said are now up 5% year over year.
By the way, this issue with COLAs not adequately matching real inflation isn’t new, and it’s not purely a byproduct of 2020’s economic lockdown. Retirees have been getting shortchanged for years.
Back to Barrons:
Because of the particular inflation seniors face, people who retired 20 years ago have had their buying power fall 30%, said Johnson (analyst for the Senior Citizens League). Since 2000, Social Security COLAs have gone up 55%, yet the typical senior’s expenses have grown 101.7%, she said.
That includes a 226% increase in Medicare Part B premiums, or the charge people pay each month to get Medicare. And the medical out-of-pocket expenses—not covered by Medicare—have climbed 142%.
Based only on the CPI—and without the extra medical expenses seniors face—a person who retired in 2000 would need about $156,000 now for the same standard of living $100,000 provided when they first retired.
If you’ve been retired for a while, you probably already feel this…and you’re seeing it grow worse.
***And traditional inflation-busting financial assets aren’t helping
In Monday’s Digest, we highlighted the pathetic shape of traditional income investments in today’s market.
From Monday:
According to the FDIC, the national average interest rate on savings accounts is 0.06%.
It improves only marginally if we look at CDs. Whereas in 1984 the average one-year CD paid over 10%, today, it’s 0.17%.
For a five-year CD, the rate climbs only to 0.31%.
And bonds?
As I write Monday morning, the 10-year Treasury bond – which has soared higher this year – still only clocks in at 1.48%.
That means an investor who’s about to retire with a $1 million portfolio invested in government 10-years would generate just $14,800 a year.
We can also add to this the S&P’s average dividend yield, which comes in at 1.34% as I write. Below is roughly 150 years of history showing how anemic this rate is compared to past decades…
And what about TIPS, which stands for “Treasury Inflation-Protected Securities”? These assets are specifically designed to help protect purchasing power.
Well, the average yield on a TIPS is actually negative at the moment, as you can see below…
A negative TIPS yield means your investment isn’t keeping up with the rate of inflation, so your purchasing power is eroding.
If you’re unclear on how this could be, here’s The Balance:
The answer is that the yield on a TIPS bond is equal to the Treasury bond yield minus the expected inflation rate…
As a result, when standard Treasury bonds are trading at yields below the expected inflation rate…TIPS yields fall into negative territory.
Bottom-line, wherever you look in today’s market, high-yielding income investments are tough to come by.
That’s why tonight’s event with Louis could be such a gamechanger for retirees and near-retirees facing a cash-crunch.
***How to help your retirement finances
For newer Digest, readers, Louis is one of the early pioneers of using predictive algorithms to scour the markets for quantitatively-strong stocks. Forbes even named him the “King of Quants.”
In recent months, Louis has focused his quantitative approach on helping address the problem we’ve been discussing today – generating income in a zero-rate world.
From Louis:
Income is all but nonexistent in the traditional quarters, like the bond market; forget it. 1.45% on the 10-year Treasury is just not worth your time!
And with the Federal Reserve expected to keep interest rates low for at least another two years, this is going to be a problem for those trying to earn extra income… especially those looking to retire soon.
According to a recent survey, only 10% of folks have enough money to last them until their 80s. And more than 10,000 Americans reach the age of 65 every day.
That gap needs to get filled somehow!
So, I’m setting out on a new project: To find a method that can put thousands of dollars of cash into the hands of everyday Americans quickly and consistently.
I’m finally ready to share what I’ve found. During my special presentation tonight at 7 p.m. Eastern time of the Accelerated Income Project 2021, I’m going to give you a sneak peek at this new income breakthrough…
If you’re in retirement and find yourself anxious about your financial situation, you’re not alone. Recently, retirees revealed their biggest financial fears in a survey report from Edward Jones and Age Wave.
The percentage of retirees who are scared of inflation clocks in at 32%, which is up from 24% just last year.
Louis’ market approach addresses this fear head-on.
On that note, here’s Louis with our final word:
My strategy offers a way to generate massive, consistent, hold-in-your-hand cash payouts from the markets… starting with only a small initial investment.
It’s already proving to be such a retirement game changer that it could even be the “ultimate solution” to America’s retirement crisis.
Join me tonight for the Accelerated Income Project 2021 to learn more about it.
Have a good evening,
Jeff Remsburg
