The cost of living will double in 10 years. In this episode, I'm going to address inflation
alert. Cost of living to go up significantly. And I'll prove to you
what's happening and what caused it to happen.
So, my name is Doug Andrew and I've helped people optimize their financial assets and
minimize taxes for more than 4 and a half decades. So, I've watched a lot of periods
of time where inflation has eroded away the purchasing power of those dollars,
those hard-earned dollars that people save and sock away for goals like retirement.
In fact, taxes and inflation are the 2 biggest reasons why retirees outlive their money.
So, for 4 and a half decades, I've helped people become immune from taxes going up
and from inflation. I don't like inflation any more than you probably do but it doesn't hurt
me. It actually helps me. So, let me explain why we're headed for significant inflation,
what causes it, and then i'm going to come back full circle and share with you what you can do to
hedge against inflation and protect yourself from the purchasing power of the dollar being cut in
half about every 10 years. Or in other words, the cost of living doubling every 10 years.
So, why does this even happen? When we have a lot of government spending and I think a lot of people
can see that the government has been spending way, way, way more than they bring in. For example,
usually as of the recording of this episode, the budget for the federal government has
been approximately 5 trillion dollars. So, the IRS tries to collect 5 trillion. So, sometimes
spend it before they bring it in. But they're always trying to balance this thing so that
they bring in 5 trillion of revenue to cover the 5 trillion that is being spent. Well,
because of covid 19, of the pandemic and so forth, a lot of stimulus packages were passed.
And then also another relief bill. And now another infrastructure bill. And they're trying to spend
money like crazy. To be honest with you, they are spending more than double what they bring in. So,
they have to raise taxes or do what? Print money. And sometimes that's what happens in governments
across the world. We see that anytime a country to cover their spending... When they spend more
than they bring in, if they try to solve it by printing money; it is never ever turned out good.
Show me one time it has ever turned out good. And so, I'm concerned. And this is why inflation
is going to be significant because when you fill the economy full of a bunch of printed money
that causes the dollar to become worth less. Goods and services cost more. You get less bang
for your buck and so forth. And that's called inflation. The cost of living goes up. Now,
to be honest, for about the last decade or more, the government changed the way they calculate
inflation. They used to say, "From year to year, okay, these goods and these services,
how much did they go up in price?" And they used to say, "A filet mignon, an 8-ounce filet mignon
is compared to an eight-ounce filet mignon a year later." Now, they reserve the right to say, "Well,
an 8-ounce filet mignon, we can show hamburger instead of a filet because it's still red meat."
What? No. And so, sometimes the way they report the inflation rate is really skewed. Now,
that was just an example of how ridiculous it is the way sometimes they report
inflation and the cost of living. So, they've been trying to hold it down thinking, "Oh,
inflation. It's only been 2 or 3 percent." Okay, well again, there's a lot of Americans
that if inflation is %, they have their money in the bank or credit union earning less than one.
So, what does that mean? You're rowing upstream so to speak at one mile an hour --1% interest. Well,
the current of inflation is coming down at 3 miles an hour, 3%. Which way are you going? You're going
backwards, okay? You are losing purchasing power. That's the danger of inflation. Now, how do you
calculate what inflation will do to the purchasing power of the dollar or the cost of living?
When it goes to 5% or 10%. Because there's a lot of goods and services like health care costs,
prescriptions and so forth, where the inflation rate is 7, 10 percent, even 15%. I remember back
in the 1980s, we had double digit inflation. But I'm going to make a statement here and prove it
to you. Because of a strategy I've used for years and I'm going to gift you a copy of my most recent
bestselling book at the end of this if you'll stay with me that'll explain this. I've always earned
a rate of return tax-free of at least 5.5% greater than the inflation rate at the time.
How do I do that? It's because I link my returns to the things that inflate.
When inflation was at 10%, I was earning 15.5% is what I'm saying. So, I don't like inflation
any more than you do but it doesn't hurt me because if inflation goes to double digits at 10,
I'll earn probably 15 based on history. I can't guarantee that but it's been true for
over 45 years with my favorite instrument which I call the Laser Fund, okay? So,
you link your returns to the things that inflate. So, inflation helps you instead of hinders you.
So, how do we calculate the rate of inflation and the impact of it on our dollars?
Here's a formula. Now, if this is intriguing you and you can think of somebody that
ought to watch this, share, make a comment, like. But I would love for you to subscribe
to this channel. I post an in-depth answer to a financial question almost on a daily basis.
I'm passionate about education and empowering you, okay? So, here is what we call the rule of 72.
If you take the interest rate that you earn on an investment and divide that interest rate
into the number 72, it tells you how fast your money will double. So, let's say you're earning
5% interest on your money. Five into 72 your money doubles every 14.4 years.
If you're earning 7.2 divided into 72, your money doubles every 10 years. If you're earning 10,
it doubles every 7.2 years. You got it? Well, sort of the reciprocal of that equation is true. So,
if you could get by on (let's say) 5,000 a month right now and you are wondering, "Well, what about
inflation?" I go, "What inflation rate should we use?" Well, let's say 7.2% because it's going to
be in excess of that in my opinion. That means the cost of living will double every 10 years.
So, that means if you can get by on 5,000 a month today, in 10 years, you'll need 10,000 a month.
In 20 years, you'll need 20,000 a month to buy the same gallons of gas, and loaves of bread,
haircuts, golf green fees prescriptions that you could've bought for 5,000 20 years earlier.
What about 10% inflation? Mark my word. We are headed for double-digit inflation because of
history, whenever they print money like they've been printing lately, this is where it goes.
So, 10% inflation into 72, it doubles every 7.2 years. That means if you could get by
on 5,000 a month today, you're going to need 10,000 a month to buy the same gallons of gas,
haircuts, and loaves of bread in 7.2 years. In 14.4 years, you're going to need 20 grand
to buy the same goods and services that you could buy with 5,000 a month just 15 years earlier.
This is what causes people to outlive their money because they have to keep pulling out far,
far more money. And not only that, they're pulling it out of buyers of 401(k)s and they're raising
taxes. And so, you have to take out 50% more in a 33% bracket. You have a million-dollar nest egg
and it's earning10%. And so, you think you can just pull out 100,000 but you pretty soon need
100,000 to buy what 50,000 used to buy because the cost of living doubled. But to net 100,000,
you have to pull out 150,000, pay tax of a third, 50 to net 100. This is what I call the tax
and inflation power curve. Those are the 2 dangers that cause most Americans to outlive their money
within 15 years of retiring. So, what can you do to protect yourself so you don't outlive your
money. So, if you're concerned and you agree with me that because of the printing of money,
irresponsible government spending that they've been trying to hold down inflation but they can't
do it forever; we are going to see inflation go to 7, 10 percent. Heaven forbid, even higher.
So, if the cost of living doubles every 7 to 10 years which means the purchasing power
of your hard-earned dollars gets cut in half every 7 to 10 years, meaning
in 15 years or for sure probably in 20 years, you can only buy one-fourth of which he used to
buy because again the cost of living has gone up. The purchasing power of the dollar has gone down.
What can you do? I mentioned earlier in this episode what I do is I link
my returns I'm getting on my money to the things that inflate. This is a strategy called indexing.
Now, in this episode, I cannot explain indexing in detail. I want you to watch other episodes
where I teach about indexing or you can read because I want to gift you a copy of this book.
In a nutshell, when you use indexing with my favorite vehicle to accumulate my money tax-free,
and be able to use it tax-free, and when I die it transfers tax-free. Nothing else in the internal
revenue code does that. And it's not anything new. It's been around for 107 years. It's a sacred
tax-free cash cow. And EF Hutton cleared back in the 1980s, they weren't even an insurance company.
But they're the brainchild behind this instrument. And I call it the Laser Fund because laser
stands for liquid asset safely earned and returns. It passes liquidity, safety, and rate of return
test with flying colors, okay? Now, I use this instrument for the tax-free accumulation of
my money and tax-free income. Every million can generate 60 thousand, 80 thousand. Most people get
about 100 thousand a year if they have a million dollars in their Laser Fund totally tax-free
if they live to be 120. They just keep getting 100 grand a year. Now, what about inflation? Well,
by using indexing, this is indexed universal life insurance contracts. You're linking your
returns to whatever the market is doing, the S&P 500, the Dow Jones, the Euro Stock Index,
it could be the Russell 2000. Those are the goods and services that are going up in price. Those are
the things that are inflating. You're linking your returns to those but your money is not invested
in the market. And people go, "What?" You need to read and understand this or watch another episode.
So, it basically allows me to participate when the market goes up. But when the market crashes,
which it does every (you know) 7 or 8 years, I don't lose. I have averaged
10.07 net cash on cash tax-free rates of return in my Laser Fund. Some years, I've earned 8.2.
Some years nothing but other years as high as 61%. I'm just giving you averages. But it means simply
that if you could earn 10 and inflation is at 5, you're earning double inflation rate.
But if inflation goes to 10, like back in the 1980s, do you know what I was earning
on mine? 15 and a half percent. I've had years where I made 21% when inflation was
clear up there. And so, I've always believed you want to make sure your money is linked to
those things that are inflating and now you'll be immune from inflation. It will actually help
you instead of hinder you. Is this intriguing yet? Study this. It's 300 pages. It's called the Laser
Fund. My most recent bestselling book. You don't need to pay $20 retail. I'll gift you a copy.
To claim your free copy, go to laserfund... LASERfund.com or click below.
You contribute a nominal amount towards the shipping and handling I'll cover the rest of that
cost. I'll fire out a hard copy to you. There's also options there if you like to listen and learn
or watch and learn. But this will teach you how to diversify and create the foundation for a tax-free
retirement. And it's the best hedge against inflation that I've ever seen in my career.