Listen to this video by Rick Rule, one of the best I have watched, about how to handle the potential of inflation and the 5 steps to be successful in investing.
Now, you might wonder why I'm talking about investing outside of the realm of annuities. No man lives on an island. Everything needs to work together. An income floor is what allows you to take advantage of investment opportunities that also have catastrophic risks. A great line to use with your clients by the way. Also important, your success as an annuity business owner is dependent on your allocation of capital. If you spend everything you make on things that don’t provide returns, then I would feel responsible for that if I didn’t encourage the oppositive behavior.
My favorite line other than the 5 steps he goes over towards the end of the video, is that saving money is an option's premium on future investments. This is a genius viewpoint that I think the vast majority of investors don’t have a clue about. Most people are fully invested all the time and never have the liquidity to take advantage of investments below their intrinsic value when everything is crashing.
Also, think of this in light of our typical client that is completely dependent on their savings. Laddered income designs that attack inflation to the greatest extent possible have to be part of our planning process whenever our clients give us the resources available to mitigate that problem.
One final note is that there are some deflationary indicators over the long run that might counterbalance inflation according to many top economists, but there will be higher inflation in the short term for sure.
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