Investors failing to prepare for inflation effects on their money
Many investors fail to take inflation into account. That’s not surprising, given that inflation has remained stable since 1980, and the 1970s “stagflation” era—which saw inflation rates climb higher than 12 percent for a brief time in 1979—is a distant memory.
That 30-year lull has left many investors unprepared to make their money last if inflation spikes, said Tony Badalamenti (CPA, RFC), CEO of Asset Builders – Financial Planners, a Florida-based wealth management and retirement planning firm.
“The old formula of deducting one’s age from 100, I don’t adhere to that so much anymore,” Badalamenti told The Suit Magazine recently. “I try to make sure we’re planning from an earlier age … They have to overcome inflation.”
Asset Builders – Financial Planners takes a customized approach to clients, finding the right mix of investments to help them reach their goals. The firm acts as a fiduciary, meaning Badalamenti puts clients’ interests before commission considerations or the fees he might collect.
Stagflation, or its relative, runaway inflation, likely aren’t coming back any time soon, stated a recent report in Quartz—an online news website owned by Atlantic Media Co.—but inflation has ticked up in recent years. Many market watchers expect inflation to stabilize around 2 percent in the short term, and some believe it could rise to 2.5 percent, still low by historical standards. Even so, many investors remain unprepared for even the modest, steady inflation that is pushing their money’s value down now.
For example, despite slow and steady inflation, it would take about $19,000 in 2017 to make a $10,000 purchase in 1990, an almost 100 percent increase.
Badalamenti said a former client, years ago, withdrew a significant sum of cash and transferred it to a safe deposit box.
“I told her, ‘One day, you’re going to open that box and find a pile of dust,’” he said. “People are not investing or saving enough to combat the effects of inflation.”
Asset Builders – Financial Planners helps clients combat inflation by carefully deciding “which direction” to advise clients to go in. Badalamenti said he uses clients’ tax returns as a guide to help determine their needs. The firm also keeps in touch with clients frequently—using a quarterly review system—and takes a special interest in making sure investors are prepared for long-term care, which Badalamenti describes as the “Sword over everyone’s head.”
But no matter which direction Badalamenti advises his client to go in, he works to put their needs before his fees.
“To me everybody has equal need because of the position they’re in,” Badalamenti said. “It shouldn’t be the position I’m concerned about, or how much income I’m going to get … It’s about how beneficial we’re going to be to this family or this individual.”
For more information see: www.abfpplanforlife.com
Securities offered through INVEST Financial Corporation (INVEST), member FINRA, SIPC, and a federally registered investment adviser is not affiliated with Asset Builders Financial Planners. Securities, advisory services and certain insurance products are offered through INVEST and affiliated insurance agencies.
