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What will 'Trumpflation' do for you?

There is a warning that “Trumpflation” could be a problem for retirees who are trying to live off accumulated capital.

Thursday, February 2nd 2017, 6:00AM

Ralph Stewart, managing director of Lifetime Retirement Income, which provides an annuity product to help retirees manage their income, said the world could soon look quite different for some investors.
“According to Investopedia, an online financial dictionary, ‘Trumpflation’ is the ‘inflation that may appear during Donald Trump's presidential administration’,” he said.

“Such speculative comment might seem a little premature but economists do like to be forward-looking. And if inflation – whether Trumped up or not - appears after years of price stability that has bordered on deflation, the world will be a very different place.”

He pointed to predictions that inflation is tipped to increase in New Zealand over 2017, with interest rates following suit.

“For retirees, this is the classic ‘good news, bad news’ conundrum. Rising interest rates mean higher returns on savings but higher inflation eats into retirement savings faster.

“Retirees will need to keep a close eye on how the delicate balance between these two forces plays out. Most people in retirement live on a fixed income and need to manage their money carefully.”

The latest Household Expenditure survey from Statistics New Zealand shows between 2013 and 2016, average weekly household expenditure increased by $190 or 17.1% to $1300.

About 15% of the top-earning households said their income, was not enough or only just enough to get by. Almost 10% of the lowest-income group said they had more than enough.

“Much of that increase was felt in sectors that disproportionately affect retirees,” Stewart said.

“For example, the largest increase in expenses over the three-year period was in housing and household utilities, which added $61 in weekly costs to the average budget.

“‘Trumpflation’ – if it occurs – may increase the cost-of-living for us all but as the Household Expenditure survey illustrates, how you cope with inflation is influenced both by absolute levels of income and your own definition of enough.”

 

Read more:
Trump: Uncertainty as well as hope
Opportunities in post-Trump world

 

Tags: Ralph Stewart

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