TIME Financial Education

How We Can Fix the Economy and Save Capitalism

Bringing the underprivileged into the financial mainstream would do no less than save our way of life, argues the activist John Hope Bryant.

The civil rights battles of the 1960s changed the course of American history. But the fight isn’t over. It just has a new front: economic empowerment.

Vast segments of the population “never got the memo” on how to save, invest, find a great job, start a business, and otherwise operate in the realm of free enterprise, John Hope Bryant asserts in How the Poor Can Save Capitalism. An activist for bringing the poor into the financial mainstream, Bryant argues that those who fail to “understand the global language of money” are nothing more than “economic slaves.” So financial education “is a new civil rights issue.”

This isn’t an entirely new thought. After the civil war, President Lincoln established the Freedman’s Savings and Trust with the mission to teach newly freed black Americans about money. Even then, it was apparent that some ability for the poor to borrow at reasonable rates, save and earn a return was in their and the nation’s best interest.

But the Freedman Bank quickly failed through the mismanagement of politicians, and broad-based financial education is only now really beginning to catch on. Bryant describes how his own father missed the money memo. A concrete contractor, he would bid $1.50 for $1 of work and “ended his amazing career dead broke.” He knew about hard work; he just didn’t know how to translate that hard work into economic gain.

When we talk about financial education today we mostly think of teaching young people how and why to budget, manage their credit, shop wisely, live within their means, and begin saving immediately for retirement. They will come of age in a world without safety nets and must take saving seriously at an early age. It’s the surest way to get to financial security and it’s a simple point that I try to make as often as makes sense.

Bryant is on board for all that. It’s why he and his book are even on my radar. But he makes a point not often made: to the underprivileged, basic concepts like saving for retirement and managing credit wisely are of another world; this group just needs a bank account to avoid predatory check-cashing services, role models from the neighborhood to show them how to start and build a small enterprise, and a few modest money successes to build their confidence. This is financial education at a very basic level.

Globally, half of adults totaling some 2.5 billion do not have a formal bank account. This shuts them off from credit and savings opportunities that you may take for granted; it hinders their rise to a better life and squanders the potential to convert hundreds of millions of people from economic drains into economic contributors. Some 40 million of these unbanked are in the U.S., and by reaching them Bryant believes we can lift them out of poverty and resuscitate our moribund economy. His plan includes a variety of near-term tax and other incentives that, naturally, have a cost. But Bryant would ask: what’s it worth to save the economy?

Financial inclusion for the poor is not the same issue as financial education for all kids. But the two are closely linked. All young people should be exposed to money basics like, budgets, credit cards, college loans, compound growth and inflation. Over the past decade, a global movement has emerged pushing for just that. But before any of these lessons will make any sense to the very important underprivileged among us, these people must first be brought into the mainstream where they can secure micro loans at a reasonable rate and stop giving away what little they have to payday lenders. It’s the right thing to do, and if Bryant is right it will do nothing less than save capitalism.




Closing Out Your Old 401(k)

Q: I got a check closing out my old 401(k). Can I add it to my new 401(k) without penalty? — Matt Gould, New Cumberland, Pa.

A: Yes, and act fast.

Unless you put the money in another retirement account within 60 days of receiving the check, you’ll owe taxes on the sum, plus a 10% early-withdrawal penalty if you’re not yet 59½, says John Piershale, a financial planner in Crystal Lake, III.

Related: Will you have enough to retire?

One hitch: The old plan usually withholds 20% of your account for taxes, so when you make the deposit you’ll have to use other cash to cover that 20% shortfall.

Assuming you get this done within 60 days, you’ll get the withheld money back at tax time.

If your new 401(k) plan doesn’t accept rollovers or will make you wait too long to deposit the funds, put the money in an IRA, advises Lancaster, Pa., planner Rick Rodgers. You can always move it into a 401(k) later.

TIME Personal Finance

Why Millennials Would Choose a Root Canal Over Listening to a Banker

Bank Investor Returns Seen Rising to Most Since 2007 on Test
Bloomberg—Bloomberg via Getty Images Pedestrians walk past a Citigroup Inc. Citibank branch in New York, U.S., on Tuesday, March 5, 2013. The six largest U.S. banks may return almost $41 billion to investors in the next 12 months, the most since 2007, as regulators conclude firms have amassed enough capital to withstand another economic shock. Photographer: Victor J. Blue/Bloomberg via Getty Images

Fed up with indifference, Millennials envision a bank-free existence.

It’s symbolically important that a dozen or so former bank buildings around the country—some road kill from the recession—have been turned into thriving nightclubs. The young adults who frequent these dens would tell you it’s a far better use of the space; they have little interest in banks, period.

You don’t have to look hard to find out why. Millennials have a whole new set of money issues that banks do not address in a relevant way: this generation is loaded with student debt that’s difficult to refinance; grossly underemployed without access to capital to start a business, or three; and hungry for financial guidance that isn’t self serving. Millennials also want to conduct their affairs on a smartphone, not go to a bank branch—ever.

This generation does things differently. Couples are quicker to mingle their financial accounts. They are more likely to piece together a career through four or five jobs. They share cars and apartments. They are ultra connected and enjoy teamwork and collaboration, and value experiences and meaningful employment above high pay. All this has huge and largely ignored implications for banks that just want to issue a mortgage, auto loan, or credit card. From the Millennials’ point of view, they don’t get it.

A third of Millennials say they will lead a bank-free lifestyle in the near future, according to new research from Scratch, an in-house unit of Viacom that consults with brands. Half of Millennials say they are counting on startup firms to overhaul how banks work, and 75% say they would prefer financial services from the likes of Google, Amazon, and PayPal. They expect technology companies to change the industry—not banks.

This is a thunderous warning shot for banks, which Millennials—our largest generation at around 80 million—see as a cookie cutter industry with little interest in innovation or differentiation. A third of young adults are ready to switch banks in the next 90 days; 53% say all banks are the same. Visiting a branch is like getting a root canal: 71% of Millennials would rather go to the dentist than listen to a bank’s message.

With numbers like that you might expect they’d also stay away from former bank buildings—just because. Then again, Millennials may find a level of catharsis partying in places like The Vault in Sacramento, Calif., (formerly Bank of Italy), Capitale in New York (formerly Bowery Savings bank), and Bond in Boston (formerly a Federal Reserve building). It feels a little like grave dancing.

“None of the big banks have made a public shift from selling credit to empowering human endeavor,” says Scratch executive vice president Ross Martin. He believes there is an opportunity for banks that can flip the switch. Millennials grew up believing they were special and could not be stopped. They’ve been pummeled by reality but yet retain a high level of confidence and optimism. According to Scratch research:

  • 73% of Millennials say when they decide to do something no one can stop them.
  • 80% say they are sure they will get what they want in life.
  • 82% own their future; saying when they fail at something it’s their fault—not someone else’s.

“This generation needs someone to bet on them,” says Martin. It’s not enough for a bank to be reliable, trustworthy, green, and community oriented. Bankers need innovative products and services that will help Millennials carve out their unique path to success. They need micro loans and a new way to assess creditworthiness that does not revolve around a single full-time employer. They need impartial counseling on how to save and invest. They’d flock to a bank that felt more like Starbucks or Apple than a hospital operating room.

Rethinking lending and other financial services presents an imposing challenge. Millennials rank the four largest banks among the 10 least loved brands in America, Scratch found. Says Martin: “We’ve never seen numbers like that.” So banks can either figure it out and capture this generation’s heart, or watch the kids dance on their grave.


TIME Personal Finance

This Quiz Showed Me Just How Cheap I Really Am

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Maybe saving money at every turn isn't the right approach. Smart spending on your happiness and relationships provide much needed balance.

I’ve always known that I am cautious with money. I just didn’t know how cautious—possibly to a fault—until I spent a few minutes with a new online assessment tool Your Money Mind.

The tool centers on a seven-question quiz, and the goal is to determine what motivates your spending decisions. The answers fall into three categories: fear of making mistakes and hurting your long-term financial health; happiness derived from spending on things you want; and commitment demonstrated by spending in ways that enhance your relationships.

Ideally, you want some balance among the three. In taking the quiz a half-dozen times, however, I found a consistent and decided skew toward the fear factor. My primary goal, the quiz showed me, is to seek safety and security. Happiness clocked in second; commitment a distant third. Here are three typical questions that pulled back the curtain on my extreme frugality:

  • Your best friend is planning a wedding all the way in the Caribbean. Do you feel: excited about the adventure, frustrated because of the cost, or mixed but willing to go anywhere to support your friend? C’mon, man. Just stay in town.
  • You’re asked to buy a raffle ticket. Do you say: sure it’s for a good cause, no thanks I never win, or yes I am due for a big score? Sorry, I don’t play lotto either.
  • Your spouse wants to take up golf. Do you buy: a set of used clubs because this will never last, a new set of clubs for the both of you, or a new set plus private lessons just for your spouse? Honey, I love you. But there’s a brand new archery set collecting dust in the garage.

I don’t think of myself as cheap, or uncaring. But this game clearly does. Not that I’m taking it too seriously. A one-size-fits-all quiz is far from perfect. According to the assessment, I am “slow to make decisions and as result may miss opportunities.” Nonsense. I decided right away that the Caribbean wedding was a frustrating expense—but that, yes, I must go. And when it comes to really big expenses like buying a house there is no such thing as too slow. When you are ready, you are ready. If someone swoops in, so be it. Other houses will be there.

Still, I expect that this assessment of my money mind will alter my approach to financial decisions in some ways. It turns out that saving money isn’t the only thing that matters. Maybe I make too many personal sacrifices in the name of security. Maybe I over emphasize delayed gratification. Maybe I should, well, live a little. That’s what the quiz designers at United Capital Private Wealth Counseling concluded. They seem to be nudging me towards that African safari we’ve long dreamed about. But you know, I believe I’ll just think about that a while longer.





TIME Personal Finance

Jacking Up Your Crippling Debt Just Got a Lot Easier

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Now you can instantly own the things you see on TV and read about in magazines

Americans haven’t been much good at waiting for things since banker A.P. Giannini popularized consumer credit a century ago. But what began as productive acceleration—a home to live in and build wealth; a car to get to work in and get ahead—has turned into alarming warp-speed consumption. It’s one thing to instantly hail a cab through the Uber app on your smartphone or get a meal delivered in 45 minutes via Seamless. You may actually need those things. But what about a pair of fetching high heels you read about in Vogue or the trendy home décor you see on a TV show?

Through technology you can have those things right now too. Yet things you want—not need—rightly belong in another basket, one that you consider for more than a nanosecond and for which you have put away money rather than purchase with plastic. This is the new world we live in, though. The cable station TBS and the retailing giant Target have just teamed up to allow viewers of Cougar Town, a popular sit-com starring Courtney Cox, to instantly buy dozens of items they see while watching the program. Check out the first shoppable episode archived at TBS.com/Target.

In another blow to delayed gratification, MasterCard and publisher Conde Nast last fall unveiled technology that will allow anyone reading Wired, and eventually Vogue, Vanity Fair and other magazines on a tablet to instantly purchase the items they read about by tapping their screen. This isn’t just for advertised goods, but for items described in editorial text as well. You can own that little black dress before finishing the sentence.

eBay and Amazon are testing same-day service. Wal-mart is looking at the concept. Google Shopping Express has a pilot program and hopes to deliver goods within hours of ordering from the likes of Walgreens and Toys ‘R’ Us. As Matt McKenna, the founder and president of Red Fish Media, a digital and mobile marketing agency, told The New York Times: “The whole world right now is about instant gratification.”

MasterCard is in hearty agreement. In announcing the deal with Conde Nast, Garry Lyons, chief innovation officer, said, “Today’s consumer should not have to think about the shopping process. When they see what they want, they should be able to get it as quickly as possible.” Let’s allow that to sink in for a moment. Do we really want impulse shopping at the speed of light?

Certainly, this isn’t what Giannini had in mind when he opened the doors to broader consumerism. The convenience of instant purchase cannot to be denied, but neither can the likely negative impact on individuals’ finances—and in the case of young consumers, their raw ability to develop sound money skills.

Decades of research show that impulse buying leads to difficult levels of personal debt, and that delaying gratification is among the most fundamental building blocks of smart money management. As this study shows, items you don’t need become less attractive with each day that you avoid them. Live by the rule that you’ll wait 24 hours before any non-essential purchase and you will wind up spending much less money—and not missing many of the things you didn’t buy.

Finally, how can I write about the importance of delayed gratification without mentioning the famous Stanford University marshmallow study in the 1960s? This bellwether study, repeated often and captured here in precious fashion, offered a group of youngsters a marshmallow and a choice: wait 15 minutes before eating the treat and they would be rewarded with a second marshmallow. Some kids caved quickly; others waited and earned the extra marshmallow.

Researchers tracked these kids for years and found that those who were able to wait for the bonus marshmallow had fewer behavior problems, lower stress, stronger friendships, and higher academic aptitude. Think about that the next time you are scrolling an article on your iPad and, right now, simply must have a fabulous new hat described in the text.

TIME Retirement

Even More Proof Americans Think It’s a Great Time to Retire

Jonathan Kitchen—Getty Images

A new survey by the Employee Benefit Research Institute finds that 18 percent of Americans are "very confident" they'll live comfortably when they retire, up 5 percent from last year, thanks to planning like a 401(k) plan or IRA

The evidence keeps pouring in: last year’s torrid stock gains have revitalized the retirement dreams of many Americans. After five years of rock-bottom readings, new data show that confidence in a secure retirement has lifted for workers and retirees alike.

Among workers, 18% now say they are “very confident” they will live comfortably in retirement, up from 13% last year and similar readings each previous year since the recession, according to the 2014 Retirement Confidence Survey from the Employee Benefit Research Institute. Some 37% of workers are “somewhat confident”—also a post-recession high-water mark.

Among retirees, 28% now say they are very confident about maintaining their lifestyle, up from 18% last year; 39% say they are somewhat confident. For both workers and retirees, confidence remains short of peak levels reached before 2007. For example, 79% of retirees were very or somewhat confident about their future just before the crisis—a difference of 12 percentage points.

The reversal is heartening news and ads heft to recent reports showing that retirees, especially, are feeling better than they have in years. Fewer are postponing retirement and more say they believe the stock market will continue to rise and that interest rates will rise as well, providing a higher level of secure income.

But let’s not declare victory over hard times just yet. Two distinct sets of savers seem to be driving the gains in confidence: those with high household income and those who participate in a formal retirement plan like a 401(k) or IRA, EBRI found. This uneven advance may help explain why the percentage of the most forlorn workers and retirees–those saying they are “not at all confident” about retirement security–remains stuck at recession levels.

Nearly 50% of workers without a retirement plan are not at all confident about their financial security, compared with about 10% of those with a plan. Workers in a formal plan are more than twice as likely to be very confident (24%, vs. 9%) about retirement, EBRI found.

The biggest impediments to saving seem to be the high cost of day-to-day living and accumulated debt, the survey found. More than half of workers say daily expenses consume all their income. Meanwhile, only 3% of workers that describe debt as a major problem feel comfortable about retiring while 29% of those who have few debt issues say they are confident in their ability to retire comfortably. That’s hardly a surprise. But it drives home the importance of getting control of your debts before retiring.

TIME Personal Finance

U.S. Millionaires Club Grows To Almost 10 Million

A record 9.63 million households had a net worth of $1 million or more last year, a 58 percent increase from 2008. The number of affluent households worth between $100,000 and $1 million also went up in 2013

There was a record 9.63 million households in the U.S. with a net worth of $1 million or more last year, according to new market research.

The number of millionaire households surged 58 percent from a dip in 2008, when there were 6.7 million households worth $1 million or more (not including primary residences). In 2007, there were 9.2 million households worth that amount, reports market research firm Spectrem Group

At the wealthiest levels, there were 132,000 households with a net worth of $25 million or more, up from 125,000 in 2007, before the recession.

The number of affluent households worth between $100,000 and $1 million was also up in 2013 from a year earlier. There were 28.97 million households in that category last year, a jump of 500,000 from 2012.

TIME Careers & Workplace

The Huge Mistake Millennials Are Making Now

skynesher—Getty Images/Vetta

Young workers rate international opportunities dead last when it comes to what makes a job attractive. Why travel when you can get all the foreign experience you need via FaceTime?

Millennials are taking telecommuting to a whole new level. They view virtual foreign work experience as having equal career value to a true stint overseas, a new report reveals. As a result, many are passing up foreign assignments that, in a global economy, could help them advance more quickly.

International experience ranks dead last among 15 factors that make a job attractive, according to Millennial Compass, a study of work-life attitudes by MSL Group and researchers Dr. Carina Paine Schofield and Sue Honoré at Ashridge Business School in the U.K. Ranking second to last in importance: working in a multi-cultural environment.

Who knew that twentysomethings were such homebodies? This would seem to come as a shock to an entire industry that has sprung up to facilitate overseas internships and work experience, as well as to global corporations that need boots on the ground in many different cultures. Still, while the younger generation of workers may prefer their iPad to a suitcase, don’t call them insular.

Millennials say they are missing out on nothing. They believe they are gaining international experience through social media, personal networks and technology. Growing up in a world where the Internet has erased geographic boundaries, many young workers are confident in their ability to run business in a new way. As one respondent put it: “The place I get hung up on is the actual, physical overseas part of it. In such an interconnected world, I don’t necessarily think you need to literally travel across the ocean to get overseas experience.”

We’ve known for years that this generation values work-life balance and a meaningful job experience, teamwork, and job mobility above rapid advancement. I respect these priorities and young workers who get the job done on their own terms. I also accept their ability to forge real bonds and relationships over the Internet. But for a group that came of age in a global economy, it seems odd that young folks would dismiss physical multi-cultural experience so readily.

In the U.S., just 18% of Millennials intend to work overseas in the next five years—and that’s mainly to gain personal, not career experience, the study found. The numbers are low in the U.K (29%) and France (28%) as well. Millennials in nations such as India, China and Brazil have a higher regard for international experience. For example, 70% in India and 61% in China say working overseas for a while is important.

So guess what? Those countries are where global companies will step up recruiting. “Millennials in countries such as the U.S., U.K. and France are lowering their chances for exciting career opportunities in global corporations when they show less interest in moving far beyond their native geography, family and friends,” says Brian Burgess, global co-leader of the employee practice at MSL. “Millennials should not confuse global social connections with real global experience.”

The good news is that young Americans willing to tear themselves away from their family and friends for a few years can stand out and reap significant career benefits. In time, the millennial generation will be in charge and the companies they run may be more accepting of workers who see no difference between Skype and a handshake. But for now—not that Millennials care—this stay-in-my-comfort-zone attitude threatens to hold them back.

TIME Financial Planning

The President’s New Mission: Teach the Children (About Money)

President And Mrs. Obama Depart White House For Florida
Win McNamee—Getty Images

The President’s Advisory Council on Financial Capability for Young Americans opens for business Monday and is squarely focused on kids in the effort to empower Americans to take charge of a better financial future

Shakespeare asked: what’s in a name? His point was that names do not define the person or entity. But I would argue otherwise, at least as it relates to a top authority advising the President on how to empower Americans to take charge of their financial lives.

On Monday, the President’s Advisory Council on Financial Capability for Young Americans meets for the first time. The name itself is a mouthful; the acronym PACFCYA looks like it’s been Travoltified. Still, a lot can be read into this name, which promises to set a smart new course for financial education in the U.S.

American presidents have been on the financial education bandwagon formally since George W. Bush authorized a President’s Advisory Council on Financial Literacy in 2008. Bush’s famous vision was of an ownership society. “We want people to own assets,” he said in authorizing the first council. “We want people to be able to manage their assets.”

His lofty goal was to equip everyone with the financial know-how needed to parse complicated terms and fees, and generally get ahead by fending for themselves in the free marketplace. The hope was that a population smarter about its money would reduce odds of a repeat financial crisis. As chairman of the council, Charles Schwab, wrote in the first report: “The charge was simple, yet daunting: improve financial literacy among all Americans.”

The mission took on a new look under President Obama, who in his first term reconstituted the board under the new name: President’s Advisory Council on Financial Capability, swapping “Literacy” for “Capability.” As I wrote at the time, the simple word change spoke volumes about the new council’s approach. This group was more about equalizing access to key financial products like checking and savings accounts. A big part of its mission, as stated in the charter, was to “take into consideration the particular needs of traditionally underserved populations, such as youth, minorities, low- and moderate-income Americans, immigrants, and low-literacy adults.” Meanwhile, regulators would set up vast new protections so that a deeper understanding of money issues wasn’t critical for most people.

Both approaches have their virtues. Certainly, it’s good for consumers to understand and be able to fend for themselves rather than rely on regulators to keep the financial bad guys at bay. But not everyone gets it when it comes to personal finance, and those who don’t would clearly benefit from common sense dictates like simple financial statements and plain vanilla mortgages.

Now we come to the third iteration of this important body, and “for Young Americans” has been tacked on to the name. Teaching kids about money has always been part of the council’s mission. But now it is the sole focus, which puts the emphasis where it ought to be. Solving financial illiteracy is a long-term project that should begin with young people, and by that I mean students in first grade.

“The last council was for people of all ages,” says Beth Kobliner a financial author reappointed to the new council. “Now, the entire council is about young people.” She believes the new name provides absolute clarity of the mission and that there will be little tolerance for indecision. “Action is going to be the buzzword,” she says. “It’s no coincidence that President Obama declared ‘a year of action’ in his State of the Union address.”

Another reappointed member, activist John Hope Bryant, founder and CEO of Operation Hope, echoes Kobliner’s view, writing in his blog that “this new Council will be different. It’s primary focus will be action, moving the needle, and getting things done…this Council will be more innovative, more solution seeking, more impactful.”

Research shows that early and frequent financial education works. Indeed, the council can expect a dose of data on this point at its first meeting. “This group will be able to show the country how to truly make a difference in the financial capability of our children,” says another reappointed member, Ted Beck president and CEO of the National Endowment for Financial Education.

In many ways, the financial education movement in the U.S. has stalled. There has been little progress, for example, in states making personal finance a required line of school study. The mission has been bogged down with handwringing over what works and what doesn’t, and where to best target resources. The PACFCYA seems determined to break the logjam by zeroing in on what works with kids. That may be reading a lot into a name. But then I’m no Shakespeare.

TIME Retirement

Inflation? Hooey, but You Still Need Protection in Retirement

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Just as economists and bond traders missed the reversal from inflation to disinflation three decades ago, a new generation lulled into a new reality will miss it again when consumer prices push higher in a sustained way.

Betting on the return of inflation has been a fool’s game for more than two decades. But that doesn’t mean inflation has been whipped forever, and even a moderate sustained rise in consumer prices can have devastating impact on unprepared retirees.

Consider that at just 2.5% inflation, prices would double (and your buying power would be cut in half) over a 28-year retirement. At 4%, prices would triple over that period and your buying power would fall by two-thirds. This is brutal math for any retiree in good health and living on a fixed income.

Economists like Paul Krugman at the New York Times argue there is little to fear. He believes a wrongheaded inflation obsession, chiefly among policymakers, is holding back the economic recovery. Certainly, inflation has been tame; there hasn’t been an annual reading over 4% since 1991 and most readings have been below 3%. Last year came in at just 1.5%, sparking more worries about falling prices than about rising prices.

But others argue that just as a generation of economists and bondholders accustomed to soaring inflation during the 1970s were caught off guard by 25 years of disinflation, today’s generation similarly will be caught off guard by a reversal—and the return of more rapidly rising prices. As the noted economist David Rosenberg at Gluskin Sheff recently wrote:

“We have an entirely new crew of bond traders on the desks, the sons, daughters, nephews and nieces of the old guard, who have only known disinflation, deflation, lower (minuscule) bond yields and radical Fed easing cycles. That is all they have known for their entire professional lives. Their elders didn’t see the great deflation coming, and the offspring don’t see the remote prospect of a moderately higher inflation environment coming at any time on the forecasting horizon.”

To be clear, almost no one is suggesting anything like the 1970s is in store for as far as the eye can see. But health care costs are rising a little faster, rents are going up, and labor may at last be gaining some leverage on wages in the improving economy—all potential harbingers of higher inflation down the road.

“This should scare the hell out of those of us who are retired and living on (at least partly) fixed incomes,” writes the economist Lewis Mandell for PBS. Just to be safe, you may want to inflation protect your income. Certain assets like gold and real estate serve as an inflation hedge but come with drawbacks. Gold produces no income; real estate can be fickle and difficult to sell. Happily, Social Security benefits rise along with consumer prices. So that portion of your security blanket is fine. But almost no other income-oriented investment, including most traditional pensions, automatically adjusts for inflation.

Protecting retirement income is not cheap. Mandell estimates that an immediate fixed annuity with an inflation adjustment initially generates about a third less income than one without an adjustment. So you don’t want to over do it. Still, if you can afford to sacrifice some income now such an annuity with a portion of your savings may offer peace of mind.

Another way to protect your retirement income from inflation is through Treasury Inflation-Protected Securities, better known as TIPS. These T-bonds adjust for rising consumer prices over the life of the bond, which may go out 30 years. They aren’t perfect, or cheap. But TIPS may afford the best income protection you’ll find.

Let’s say you want to protect $10,000 of annual income for the next 30 years. According to Mandell’s calculations, if inflation averages 2% over that period an investment of $52,257 in TIPS would offset any purchasing power loss due to inflation. If inflation over that period hewed to the 100-year average of 3.43% you’d need $79,553 in TIPS. At 4%, you’d need $88,703.

This exercise helps make clear the impact even modest inflation can have on your ability to pay for things with a fixed income over many years. Serious inflation probably isn’t in the cards anytime soon. But with a long runway still ahead, young retirees are at risk of losing their lifestyle unless they protect at least some of their income from the effects of inflation.

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