Can CostCo help you beat inflation?

September 26, 2011

Wow! I don’t get to the fast food drive-through as much anymore, but on a recent trip I veered off the highway for a pit stop and bite. My fast-food knowledge today includes all of the advertising slogans one might expect, including $1 menus, $5 foot-longs, and $5 hot-and-ready pizzas.

With that mindset, you can imagine my shock at a meal bill of nearly $8! Inflation has clearly hit the fast-food industry while I haven’t been paying attention!  

And it seems the cost of everything is rising lately (well, except maybe the price of stocks or homes). A simple internet search of the term “price increase” seems to suggest most goods and services are increasing in cost. Gas, steel, food, and even Netflix and Sirius XM… and that is just from the first page of results.

So, with traditional investments not keeping pace, how can you beat inflation?

On your savings, don’t lock-up your money for too long. Keep the majority of your income funds in shorter-term maturities on CDs and bonds. And don’t buy that annuity just yet. Basically, keep your investments in places where you can reinvest them when rates rise.

Over the long-run, an investment plan that includes stocks and real assets (yes, including real estate assets) should keep up with and outpace inflation, so maintain your allocations in these areas. That hasn’t been the case lately, but in the short-run, those investments don’t always move in the direct we would hope!

Neither of the above though helps with the present. One way you may beat tomorrow’s price increases is by stocking up on non-perishable items that you will use in the future. I recommend this with three exceptions:

  • You have adequate storage.

  • You really do need the items and are not simply buying them because ofthe deal.

  • If you’re like me however, and having more means you might be tempted to use more, this strategy may not be the best!

Another tip for soon-to-be retirees — if you are eligible for Social Security, and don’t need the income, postponing annuities or Social Security will give a compound inflation beating boost – your payment should increase based on both an increase in the underlying investments, as well as the fact that statistically you may need less of them.

The preceding blog was originally published by the Financial Planning Association®(FPA®). To view the original blog please visit the FPA Web site

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