{"id":1388,"date":"2022-08-23T09:25:35","date_gmt":"2022-08-23T15:25:35","guid":{"rendered":"https:\/\/financialgravityfamilyofficeservices.com\/hoenig\/?post_type=newsletter&p=1388"},"modified":"2022-09-02T09:58:41","modified_gmt":"2022-09-02T15:58:41","slug":"fighting-inflation","status":"publish","type":"newsletter","link":"https:\/\/financialgravityfamilyofficeservices.com\/hoenig\/newsletter\/fighting-inflation\/","title":{"rendered":"Fighting Inflation"},"content":{"rendered":"

Here\u2019s a headline<\/a> from August 12 that no one wanted to read: Inflation costing the average American $717 a month, analysis shows higher prices already cost Americans $8,607 over the past year.<\/p>\n

From curtailing driving to shrinkflation, America is looking for ways to economize in the face of persistent high inflation. We\u2019d like to offset all the bad news with one hopeful prospect: the cost of financial and insurance services isn\u2019t in the CPI<\/a>, but streamlining those costs may reduce or even neutralize the effects of inflation on your family.<\/p>\n

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You may have heard inflation defined as a tax on American families. Inflation does not fit the technical definition of a tax \u2014 a compulsory contribution to state revenue, levied by the government on workers’ income and business profits or added to the cost of some goods, services, and transactions.<\/p>\n

However, lots of things \u201cquack like a duck,\u201d meaning operate very much like a tax. Regulations on transportation safety, environmental protections, and food and drug inspection regimes do raise the costs of products we pay for goods and services. Any government action that raises the costs for Americans could be considered a tax. Inflation certainly fits that description.<\/p>\n

According to taxfoundation.org, \u201ca regressive tax<\/a> is one where the average tax burden decreases with income. Low-income taxpayers pay a disproportionate share of the tax burden, while middle- and high-income taxpayers shoulder a relatively small tax burden.\u201d<\/p>\n

Inflation hits every family in its own way, of course. The basket of goods and services that the Bureau of Labor Statistics uses is created by tracking the actual expenditures of thousands of American families, as captured in special diaries kept with meticulous care, but it\u2019s unlikely that any two families spend in exactly the same way.<\/p>\n

Now could be a good time to look past food, groceries and utility bills and think about some other, often very significant annual expenditures that could be lowered. In some cases, lowered enough to offset all the other rising prices.<\/p>\n

Many Americans simply don\u2019t think about how much money they spend on financial services, things like mutual fund costs and insurance premia.<\/p>\n

Mutual funds are notorious for their high, often hidden costs and tax inefficiency.\u00a0But note this: if you can reduce the costs of your financial products and services by 1%, which for many people is quite possible, you can save $5,000 per year on a half million of investable assets.<\/p>\n

For most people, $5,000 will go a long way toward offsetting higher costs at the pump and the checkout counter.<\/p>\n

Americans are living much longer than they used to, and marketplace pressures have caused insurance companies to build and offer better policies than they used to. The cost of one dollar of death benefit has dropped in many cases, so you would do well to ask yourself these three questions:<\/p>\n

Can I lower my insurance costs? Do I have the right coverage for the life I live now\u2013for example, have my children grown, is my home paid off, etc.?<\/p>\n

Can I get a higher death benefit for the same price I\u2019m paying now? Inflation has effectively lowered the purchasing power of death benefits, and your death benefit may not provide as much security as it used to.<\/p>\n

Can I get a policy whose cash value grows faster, has better \u201cliving\u201d benefits or is more tax-advantaged than the policy I have now? If you aren\u2019t 100% clear on what these terms mean, you really should get a policy review.<\/p>\n

And here\u2019s a fourth question: do you have adequate long-term care coverage? If not, here\u2019s some good news: the cost of LTC benefits in modern policy riders is nearly zero. The simple rule of thumb is this: if you bought your life insurance policy before the last census, you may be overpaying while receiving under-coverage.<\/p>\n

Inflation is not only regressive, it\u2019s frustrating. But there are things you can do to offset its impact, and we recommend you take a hard look at your investments and insurance. Streamlining and rationalizing in those areas could take some of the sting out of inflation.<\/p>\n

Paraphrasing Pericles: \u201cYou should take an interest in taxes because taxes are going to take an interest in you\u201d<\/h2>\n

A newsletter from a tax professional is likely to have an overweight of information about taxes, and this month\u2019s Chronicle is a heavyweight. We will lay out some facts and quotes, and a little opinion, and suggest you take an interest in taxes, because it seems to us that taxes are most definitely going to take an interest in you.<\/p>\n

Let\u2019s start with some sobering facts:<\/p>\n