Should You Plan for Inflation?

Inflation should be something you’re taking into account in terms of your Investments.

Attorney and Advisor Chris Berry discusses Inflation with regards to your investment in this episode of Daily Wisdom.

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Episode Transcript


Chris Berry with Castle Wealth Group. And today we’re going to talk about whether you should plan for inflation. And if you like this information, please make sure to subscribe to our YouTube channel and comment down below.

Christopher Berry is a leading estate attorney and advisor, in the area of retirement and legacy planning. He has been featured in publications, such as Forbes, Kiplinger’s, Crain’s Detroit, and more. He’s the host of the weekly radio show and podcast, The Chris Berry Show. He’s a national thought leader as it relates to retirement and legacy planning. And as authored the Amazon bestselling book, The Caregiver’s Legal Guide.

Today we’re going to talk about inflation. And whenever I talk to clients about investments, I like to remind them that really any investment can have two out of any three characteristics. And we’ll see where inflation fits into this as we discuss this, and I call this the Pick 2 Conversation. Think of a triangle. At the top of the triangle, we have the word growth. On the right side of the triangle, we have safety. On the left side of the triangle, we have liquidity. Now, any investment really only has two out of those three characteristics. If we have money, that’s safe and liquid, that’s at the bank, that’s your checking accounts, savings accounts, money markets, what do we have to sacrifice? We have to sacrifice growth. We call that lower half, or that lower piece, the safety and liquidity, we call that the now bucket of money.

Money that you should have invested maybe for that year, which would be your emergency fund, your income gap, if you do have a gap between expenses and income, and then any big expenses you have for the year, that’s your now bucket of money that should be safe and liquidated at the bank. And then we have growth and liquidity. This is having the money in the market. There’s no guarantees of safety here. And we can have aggressive portfolios, we can have conservative portfolios. But the idea is, we’re getting growth, it’s liquid, we can pull the money out, but there’s no guarantees of safety. And then we have growth and safety, but we have to sacrifice a little bit of liquidity here. On the short term, we have things like CDs, which really aren’t offering much rate of return right now, maybe 1%.


Avoid Over-Saving

We have MYGAs, which are multi-year guaranteed annuities, same things as CDs, offering a fixed rate of return, typically at a little bit longer time horizon, maybe three to five years, and offering a 2 to maybe 4% rate of return. And then considering on, on the growth and safety, where if you sacrifice a little bit of liquidity, we have things like fixed index annuities and indexed universal life, where if the market goes down, you don’t lose anything. If the market goes up, you participate in the upside of the market. So where does inflation fit in? Where anything that’s on the growth side ideally is beating inflation, but anything on the safety and liquidity and sacrificing the growth, you’re losing to inflation, where you’re actually losing money.

It seems like you’re not because you see the same balance, but understand the cost of bread is always going up. If you have more than what you should, in terms of that now bucket of money sitting in checking, savings, we call that lazy money. And that lazy money is being eroded by inflation costs, which typically is around 2, maybe 3%. So the idea is, if you have money, that’s just sitting in a bank or a CD, that’s earning less than 2 to 3%, you’re probably losing out to inflation. And so that lazy money, maybe we should invest it somewhere else. And there’s things that we can do that still offer guarantees of safety, but now offer you growth. So it’s just looking at these different tools, understanding what is the purpose, what is the timeframe for these investments? And having a lot of money sitting in checking, savings, money market, or even CDs these days, you’re losing out to inflation. Inflation should be something you’re taking to account in terms of your investments.

And maybe we shouldn’t be over-saving inside of that savings account, checking account. Maybe we should only have whatever our emergency fund is, whatever big expenses we have coming up throughout the year, and then whatever our income gap is, if we are in retirement and we need to pull assets to cover our income. Otherwise, we should maybe look at growth and liquidity, or growth and safety, for some of that quote-unquote “lazy money” to protect against inflation.

It’s been Chris Berry with Castle Wealth Group. Please make sure to subscribe and comment on our video. Thank you so much.

Castle Wealth Group has clients across the nation and helps families plan, protect and preserve what is important, by creating a retirement and legacy blueprint.



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