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Nov 18, 2021

We have reached the highest inflation rate in 30 years. What can old-time principles teach us about protecting our retirement plan against inflation? How can we protect ourselves? While inflation may seem like a problem for the country's economy, it is also a problem for us personally. On today's episode, we will discuss the inflation rate, wage growth, and how retirement accounts are changing to account for current economic times.

As of October, the annualized inflation rate is 6.2%. However, wage and income percentages are not keeping up. The wage rate growth is only 4.9%. This is a problem for those still working and for retirees. Employees aren't seeing their income keep up with inflation and retirees aren't seeing their savings keep up either. In many ways, inflation is a hidden tax.

Inflation affects us differently. Whether you are a couple in your 40s with children or a retiree enjoying their retirement in a new home, what you are spending money on looks different. Some things we have to purchase though. Always remember the consumer index report may not be an appropriate benchmark for your situation. If you are in the retirement red zone, the 5 years before retirement and the 5 years after retirement, inflation and market changes will impact you more dramatically. It's always a good idea to look at your unique plan with an advisor.

What is the government doing to help? New policies are coming out that are allowing higher contribution limits to certain retirement accounts. Unfortunately, not all retirement accounts are treated equally when it comes to these policies. Currently, those with a 401(K) can contribute $19,500 a year into that account. In 2022, this limit will be raised to $20,500. In contrast, IRAs are still limited to $6,000 a year or $7,000 a year if you are older than 50. As you can see an IRA has significantly more limitations and these accounts are often utilized by self-employed workers and small companies. If you are making your own Roth contributions as a single person your income limit will be $144,000 a year. The marriage penalty limits married couples to an income limit of $214,00 a year. Inflation is affecting many of our lives. From the gas, we buy to get to work to our retirement accounts. Make sure you have a strategy against inflation in your retirement plan.


Listen to the full episode for more details or skip around to certain topics. 

1:34 – Buying things with inflation

3:30 – Inflation’s impact on us

5:36 – Inflation going above wage rate

9:46 – When will this problem be solved?

14:34 – Retirement account contributions in 2022

18:51 – Marriage penalty re-instated

19:44 – Write off IRA contribution  


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