Whether it’s gas or groceries, inflation is making prices go up fast. Many are wondering how to keep up. Fortunately, there are plenty of ways to safeguard against inflation — and in some cases, potentially grow your wealth faster than it. This article will dive into four quick tips for keeping inflation at bay and protecting your wealth.
1. Maximize your tax-advantaged retirement contributions
Tax-advantaged retirement contributions can help you preserve and grow your wealth despite inflation. The tax savings you receive can help offset inflation’s effects, and the markets can potentially help those contributions grow faster than inflation.
Make sure you’re at least maxing out your employer match if you have a workplace plan because this is essentially free money. After that, consider a Traditional or Roth IRA to continue getting tax advantages. Traditional IRAs let you make tax-deductible contributions, but retirement withdrawals are taxed as ordinary income. Roth IRA contributions are not deductible, but qualifying withdrawals in retirement are tax-free.
2. Add an inflation rider to your life insurance policy
With life insurance, inflation can eat away at the value of your death benefit every year. This can leave your loved ones with less money in the event of your passing. Many insurers let you add an inflation rider to help prevent this. These cost extra but increase your death benefit by a fixed percentage every year to keep pace with or even grow faster than inflation. As a result, you can make sure your beneficiaries receive as much money as possible if you pass away while the policy is active.
The larger the percentage you select, the more it costs. However, a larger percentage can be worth the significant increase in your death benefit. Additionally, when you’re looking for life insurance quotes, look online. Shopping for life insurance online helps you find more quotes in less time, helping you get the coverage and inflation rider you need without breaking your budget.
3. Invest in the market
If you’re maxing your retirement accounts and your life insurance policy has an inflation rider, put as much money as you can safely and comfortably afford into a diversified set of investments. Historically, the S&P 500 has earned a 10.5% average annualized return. You can’t guarantee investment returns, but the market has a clear track record of staying ahead of inflation. That said, it’s important to consult with a financial advisor to help you determine the best investments for your circumstances, goals, time horizon, and risk tolerance.
4. Find ways to increase your income
Boosting your income can help you keep up with or get ahead of inflation, and there are many ways to do so. First, if you’re employed, try to get a raise or promotion through work. You can also try looking for a new role elsewhere — many employers are struggling to find enough workers and may pay more to hire you.
You can also try starting a side job or business. There are all sorts of options, from ridesharing and delivery driving to online businesses you can start from home. Regardless, gaining skills can help you with any of these. Seek out new skills to learn and leverage these to earn extra income.
Protect the value of your wealth against inflation
Inflation may be running hot, but there are plenty of ways to maintain and even grow the value of your wealth. Start by maximizing your tax-advantaged retirement contributions. Then, whether you have a life insurance policy or you’re looking for life insurance quotes, get an inflation rider to protect your death benefit. Finally, find ways to boost your income and invest as much as you feel comfortable in the markets. Following these tips can help you guard your finances against inflation.