Hello, Maybe you’ve been in a similar situation. You’re ready to walk out the door of your house only to have your plans get changed. We were heading out the door to see family in NC on Saturday when plans changed at the last minute. In some households people have rivalries about sports teams. In our house we have debates about whether North Carolina or South Carolina is better. I was born in and raised in the “greater state” (NC) as I affectionally call it. You have to have some kind of loyalty to where you’re from, right?

All that is to say, when Mallory was promised a trip to NC, she had to go regardless of whether plans changed. So, we headed up the road to Asheville to eat a nice meal and do a little shopping. A couple of weeks back, on our way to Savannah, we made a pitstop at sporting goods store in Columbia and I put Amelia on a sculpture of a deer for a picture (see above). Now she asks to sit on every animal outside of store. This may be a parenting fail. Apparently, at P.F. Chang’s they knew people would try to sit on their horse so they made it so big that kids could not sit on it. See below.

Well, another change of plans may be in store for some Social Security recipients. From Yahoo Finance, “Social Security recipients received a high cost-of-living adjustment (COLA) of 8.7% in 2023 — an average of $140 more per month — the largest hike in more than 40 years. That boost might just push them over the income threshold that makes their benefits taxable.”   Most people are already paying some federal taxes on their Social Security since the threshold is so low. A married couple only needs to make $32,000 for their Social Security to be taxable. Why this matters is, although ostensibly inflation has come down, according to a recent poll, “More than two-thirds of older adults said their monthly budget for essential items such as housing, food, and prescription drugs is 10% higher than one year ago.” Food and gas are taken out of the core inflation metrics when reported by the government. Amelia worried us to death until she could go up and down the stairs at a store. It's amazing how the simple things in life bring children so much happiness.

Also, from the article, “Pile on higher costs for Medicare this year. The standard monthly Part B rate rose from $164.90 to $174.70. The annual deductible for all Medicare Part B beneficiaries is $240 in 2024, an increase of $14 from 2023.”   The Wall Street Journal had bleak news too. It said, “The good news is the probability of a recession is down sharply, according to The Wall Street Journal’s latest survey of economists. The bad news is that, for a lot of people, it is still going to feel like a recession. ‘This is less a recession and more of a growth stop,’ said Rajeev Dhawan, an economist at Georgia State University.” We went on a cold walk in the woods with Ansley over the weekend.

So, what do we do when prices are rising and economic growth looks stymied? We remember why we have some of our funds allocated to the red market and growth bucket in our 3 Roles of Money process. When inflation is up, one of the best hedges against inflation is the stock market. Historically, when we have placed money in the market it has grown over time and therefore it helps us protect our purchasing power. We know when we put funds in the market today it helps us ensure we’ll be able to buy the same goods tomorrow with the growth of our funds. But we can only feel good about this strategy in retirement if we’ve done a couple of other things in junction with our red bucket.   I’ve found it helps our clients have more peace of mind when they know we have sectioned off a portion of their funds and placed them in the blue bucket. What we do with the blue bucket is invest it to be stable. We want it to earn interest over time so we don’t have funds that we’re losing to inflation by not investing at all, but we create a safety net around our blue bucket. We do this in order to use this fund to drawdown in retirement.   Ideally, we are going to have ten years of budget money earmarked for the blue bucket. Why ten years? Because in modern history it hasn’t taken ten years for the stock market to recover. With this strategy we can be in a position where we’re never having to pull money out for income in a down market and run the risk of running out of money while we are still alive and kicking. When you’re ready to talk more about how to apply this to your life please let us know. You can reach me by replying here or by calling 864.641.7955. Until next week, David C. Treece, Financial Planner

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Clients Excel, LLC is an independent financial services firm that utilizes a variety of investment and insurance products. Investment advisory services offered only by duly registered individuals through Creative One Wealth. Creative One Wealth and Clients Excel, LLC are not affiliated companies. Neither the firm nor its agents or representatives may give tax or legal advice. Individuals should consult with a qualified tax professional for guidance before making any purchasing decisions. Clients Excel, LLC is not affiliated with or endorsed by the U.S. Government or any governmental agency. Clients Excel, LLC has a strategic partnership with tax professionals and attorneys who can provide tax and/or legal advice. Published on 01.17.2024.