Most Americans, I'm sure, are feeling pretty good right now.
Home values are sky-high. So are stocks. Your brokerage account may have never looked better.
But here's the truth no politician will bother sharing:
Prices for all of these goods and services... prices for stocks and houses and art are NOT going up the way you think they are. Instead, it's the value of our money going down.
This is what ALWAYS happens at the start of a period of massive inflation and a collapsing currency.
Economists call it the "Money Illusion."
It's what happens when people start to measure their wealth in simple numeric terms instead of real terms – in other words, how many dollars you have instead of what your dollars can buy.
This is what happens when people don't take into account money-printing, increased debt, and inflation, and wrongly believe a dollar today is worth the same as it was last year, even after the Fed has pumped trillions and trillions of new dollars into the system.
Think of anything of significance you've bought recently... a washing machine or refrigerator... tires... furniture... it's all soaring in price – and that's if you can find it, because supply shortages are rampant.
Inflation causes huge economic distortions, which is one of the reasons why, as Bloomberg recently reported, we are "suddenly running low on everything." And while you may have more money in your bank or stock account, it's definitely not worth anything close to what it was just a year or so ago.
I estimate that more than 90% of the American public is falling for the Money Illusion today... Most folks are in complete denial about what is really happening in our financial system.
And unfortunately, the Money Illusion inevitably creates a frenzy... encouraging massive gambling, hoarding, and speculation... as everyone attempts to keep up with the "get rich quick" stories reported in the press.
Things are about to get really strange in America – yet most folks will have no idea what is happening.
Your money, your retirement, your future... everything is at stake.
Today, I'm hoping to change that.
I want to outline, as simply, plainly, and clearly as I can, what has happened in recent months, and what is inevitably coming next.
I've recently issued an urgent warning... what I call a "Final Wake-Up Call," for any American who cares about their money, finances, or retirement.
I explain exactly what's going on in America, why you should be concerned about what is coming, and four steps that every American should take right now.
Now, let's dig into this week's Q&A. As always, keep sending your questions, comments, and suggestions to [email protected].
Q: I know you don't shy away from unpleasant physiological realities, so here goes – belly fat. Does it have a survival value? How on earth do you get rid of it? I'm male, 88 years old, 5'10, 160 pounds, 33-inch waist, pretty trim, almost a vegetarian, and I can still get two handfuls of belly fat! My wife is younger than me, a little heavier, but she has the same problem.
So what gives with this, Doctor? Suggestions are all over the internet and none of them work. – R.W.
A: Thanks for reaching out, R.W. I'm in the camp of "a little more cushion is not a bad thing." Especially as we age, we want our internal organs to be adequately protected in case we fall or injure ourselves. Our society typically prizes washboard abs, but they're not really all they're cracked up to be...
There's actually a lot of research to support the idea that having a little extra weight as we age is a good thing. As long as your weight is consistent, being slightly overweight isn't bad. Being too heavy, however, is still associated with other health disparities – like Type 2 diabetes and heart disease.
In fact, according to a Yale University study, having a BMI of 27 – rather than the "ideal" 25 – is associated with a longer lifespan. This conclusion has been repeated in other studies coming out of Australia and Canada.
Now, if your belly weight is something you really don't want to deal with, you can always ramp up your daily physical activity... Because let's face it: Movement is the most important thing to maintain as we age.
So, I'd say to you: Don't sweat the belly (assuming you and your wife don't fall too far into the overweight category) and stay active. Also, be sure to check out my piece next month on the importance of having fun... You may find some great new ideas for ways to stay healthy and active.
Q: How do I know if I should invest in a traditional IRA or a Roth IRA? – L.H.
A: It depends on what you expect your tax bracket to be in retirement.
When you contribute to a traditional IRA, you're contributing with pre-tax dollars. That means that you pay taxes on distributions you take from a traditional IRA in retirement. So a traditional IRA most benefits people who expect to be in a lower tax bracket when they retire than when they are working.
A Roth IRA is sort of a flipped version of the traditional IRA. While you don't get a tax break on your income when you contribute, you also don't have to pay taxes when you make withdrawals. So a Roth IRA best works for people in the opposite situation. If you expect that your taxes will be higher as a retiree than as a working person, a Roth is perfect for you.
We often recommend opening both a traditional and a Roth IRA if you are unsure what your tax situation will be in your retirement. That way, you get the benefits of both methods.
Alternatively, a more advanced strategy is to convert a traditional IRA to a Roth. You won't need to pay income taxes on subsequent withdrawals, but you will need to pay a lump-sum tax when you do the conversion. This can get tricky, so we recommend talking with your financial planner about your options.
What We're Reading...
- Did you miss it? Risk is back on in the markets.
- Something different: The chip shortage is hitting even more industries.
Here's to our health, wealth, and a great retirement,
Dr. David Eifrig and the Health & Wealth Bulletin Research Team
July 30, 2021