“Three most important words in investing…Margin of Safety.” – Warren Buffett
I came across a photo from 10 years ago. It was a note Elliott wrote to the Tooth Fairy. “Only $25, please.” Ouch. I remember getting $1. Seems like everywhere prices are rising, especially the gas station and the grocery store. Is this something you notice too?
We can’t do anything to stop inflation just like we can’t do anything to stop the rain. But we CAN change how we react to it. Let me explain…
Hopefully, your investments have done well over the past couple years. When you have times of growing investments in retirement, it is not just to increase net worth, but to generate rising income over time. So, there is a purpose for the growth and that is to generate income.
Does this mean, when account values drop, you should also drop your income? Not necessarily…
Retirement planning should build in a “margin of safety” to allow for periods of time of unusually high expenses or one-off purchases from time to time. When we do retirement planning for clients, that is one of the many things we discuss.
Mistakes are made when people use times of growth to expand their lifestyle too much too fast. I have seen people buy cars or houses (long term expenses) based on short term events like bonuses from work. This doesn’t leave them enough “margin of safety” to handle rising prices on things they continue to purchase like food, gas, and their current lifestyle.
If you have questions on how inflation or current events may affect you and your family in retirement, feel free to email me at Je****@Ri*********.com or CLICK HERE to set up a phone appointment.
May be good to review,
Why Do We Have It, What To Do About It & How Does it Affect Retirement? – Finger Financial Five #73
How to prepare for market volatility- Finger Financial Five #64
One note about housing: US house prices grew 17.1% YoY in Dec 2021, following an increase of 18.4% YoY in the previous quarter. This may feel good to see your net worth rise, but often it does not increase your income. (Source: CeicData.com)
On the lighter side, The Myrtle Beach Seahawk Tennis Team is in the playoffs, after an undefeated season. First match is April 28th. If all goes well in the next few rounds, we hope to bring home the State Championship May 7th. Elliott made All-State in tennis and will represent Myrtle Beach High School in the State Singles Tournament May 9th-10th.
Hope all is well with you and your family,
Jeremy
Finger Financial Five – 5 points in 5 minutes or less – is to provide you with a weekly shot of useful financial information. My intention is to share principles, so you will have more clarity and peace and make better financial decisions.
Investment advice offered through Stratos Wealth Advisors, LLC, a registered investment advisor; DBA Riverbend Wealth Management.
This content is developed from sources believed to be providing accurate information and provided by Riverbend Wealth Management. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Stratos Wealth Partners and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
https://www.ceicdata.com/en/indicator/united-states/house-prices-growth
- US house prices grew 17.1% YoY in Dec 2021, following an increase of 18.4% YoY in the previous quarter.
