Can you retiree on 1 million of savings and no debt??
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Started by wglassfo - May 15, 2021, 4:05 a.m.

Tim and myself had a discussion about this some time ago

In Canada there are places that you need 1 million plus to even hope to buy a house, close to where you need to live for job and schools etc.

Many retirees are selling an 1800-2500 sq foot house for 1.5-2.5 million and relocating for 500,000 or a bit less leaving 1 million to invest plus gov't cheques and some have a pension

We are in the plus 100,000 income bracket. We have no problem getting a 5 % dividend plus stk appreciation which this yr was mostly10-20 % or more [some less] depending on the stk

You would think all is well and good, but I think inflation will eat into that 100,000 income 

We are looking at a "transitory" 4-5 % inflation rate depending on what you consider inflation

But if 5 % general inflation is compounded then 100,000 income buys less and less. Stk market values look to be stagnant at best or deflationary. It would be great if stks continued upward, but I think a new day has arrived in stk valuations. I hope I am wrong but the tea leaves don't give much support to general stk market prices.

The reason I say inflation is our common enemy is the deficit

You can attack the deficit with taxes, less spending or monetize the debt. I think the road of least resistance is to monetize the debt and keep printing new money to pay for gov't spending. I see nobody in gov't with any amount of support for large reduced gov't spending thus more printing is the future. Now other gov't will also print as much as they can without destroying their currency in the process. When unfunded liabilities hit the USA govt, then this will become a huge problem and printing will have to increase. All of this is inflation plain and simple. If you are on a fixed income, then suddenly in 10 yrs your 1 million doesn't buy so much and house holds will need more for basic food , utilities etc.

Now if you are in the part of the population with out 1 million and even with no debts, you have a problem People are conditioned to think the gov't will feed and cloth us. Well if the gov't does try to feed you then inflation will be the result, with a vicious circle of devalued dollars

I don't see much that will change, thus the path of least resistance is to print and pay the bills

For this reason I think inflation, no mater what, will affect millions of both canadians and the USA. The EU is ahead of us on the path to inflation as Germany can't support the entire EU block

The best solution I see see is to have a good % of your wealth in assets that track inflation and pay dividends such as land or some RE investments

At least that is how I am playing my hand for the next 10 plus yrs

I looked at pick up prices and new high value pick up trucks are priced at 149,000. The dealer expects to sell for full list price on all new trucks on his lot. Of coarse not all list at 149,000 but 70,000 is at the low end price

What do you think of inflation with house prices, used cars going up in price, steel almost non existent at any price, rare earth materials, grain prices, even with the past week price action.

Inflation is coming or is already here .The part we have to worry about is how bad inflation becomes. A few missing chips or lumber prices won't affect most of us. But general inflation will be a huge problem and a crisis seems to feed on itself. At least that is my impression of a crisis. Throw in increased int rates and the stuff really hits the fan. Most int rates for financed cars and trucks are 5 %. No more 0 % payments exist that I know about

Comments
By TimNew - May 15, 2021, 6:21 a.m.
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If you think inflation is going to stay at 4-5%,   you should buy a ton of gold.


Personally,  I don't think inflation will stay that high here in the states.  I think last report was around 4.2,  but that was a huge suprise to many, and a level I hope/expect will not be maintained.

Not as familiar with Canadian currency. My biggest exposure to Canadian currency was back in my college days,  local bars would accept Canadian currency at par, 1 Ca dollar was = 1 US Dollar,  so I'd load up on Canadian Dollars and sell them to friends and fellow patrons for a slight markup.  Probably illegal as hell but no one seemed to notice and I'd drink for free :-)

By joj - May 15, 2021, 7:12 a.m.
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All your points on inflation are excellent.

My only push back is that I have been hearing them for 30+ years and still the feared inflation monster has not devastated savings.

If the worst of your fears (and mine) come true then 10 million won’t be enough to survive.  Read “When Money Dies”.  In Germany in the early 1920s farmers survived because they wouldn’t take payment in German marks.  Barter trade emerged.  So I suppose buying grain is a hedge.

By metmike - May 15, 2021, 11:23 a.m.
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Using history to guess at where inflation is headed is useful but at times like this in very uncharted/unprecedented  territory............less useful(as JOJ pointed out, recent predictions have overshot realities) but still give us examples of how things "might" turn out.

Using money supply and spending dynamics, one could make an extremely strong case for inflation to be inevitable.

But what if the economy stalls out?

Then, that still doesn't mean we still won't have inflation. Tim mentioned this on the trading forum.............which this thread could be located but we can leave it in the NTR section so that it doesn't suddenly vanish and make it harder for people to follow.


Stagflation and Its Causes

Why Stagflation (Probably) Won't Reoccur

https://www.thebalance.com/what-is-stagflation-3305964


Stating that it probably won't reoccur again, is an invitation to be wrong.