Last month, I said that America’s baby boomers were “dead men walking.”
Shocking figures from the Federal Reserve revealed that the median household headed by a person between the ages of 60 and 62 with a 401(k) account has saved less then one quarter of what is needed for retirement.
Translation: A big chunk of would-be retirees aren’t going to be retiring anytime soon unless they take immediate action to rescue their finances.
(I recommended a three-point action plan to deal with this situation here. If you haven’t already, I urge you to read it now.)
The most obvious way to increase the amount of money in your retirement account is to earn more money. But here Americans face a serious hurdle…
…Thanks to rising inflation, wages aren’t keeping up with rising prices…
This from yesterday’s Wall Street Journal (emphasis added):
Average hourly earnings for all private-sector workers, including salaried employees, were flat in March from the previous month at $22.87. Wages have moved little in the past six months despite consistent job gains during that period.
Compared with a year earlier, average hourly earnings were up just 1.7% in March. Inflation is running above 2%, largely due to higher energy and food prices, which means workers’ average inflation-adjusted wages have declined.
If you go to work every day, put gasoline in your car and eat food, you don’t need me to point this out. You already know that the money you earn buys you less.
The question is: What can you do about it?
If you already read International Living magazine, you’ll know that one of the best ways to ensure a comfortable lifestyle is to diversify yourself beyond America’s borders.
That may mean spending part of the year based somewhere where your dollar stretches further. It may even mean taking the plunge and living overseas for less full-time.
The Best Inflation-Fighters on the Planet
Of course, our number one priority here at International Living Investor is that you have financial freedom. That’s why we spend so much time hunting down the best profit opportunities the world has to offer.
In a world of higher inflation, you want to own assets that rise along with the rate of inflation.
Wall Street types call these “inflation hedges.” But the best way to think of them is things that are in scarce supply.
I’ve recommended a number of these already. In a world where the amount of dollars in circulation is increasing thanks to the Fed’s “quantitative easing” programs, things that are in scarce supply will rise in value versus abundant cash.
Gold is the classic inflation hedge. As the dollar drops in value, the value of gold in dollar terms tends to rise. My favorite way to own gold is through the ETFS Gold Trust (NYSE:SGOL).
This ETF holds nothing but physical gold in Swiss vaults. And it has the advantage of having very low costs—just 0.39% of the money you invest goes in fees.
Other great inflation hedges are crude oil and other energy producing commodities. My favorite way to play crude oil is through the Energy Select Sector SPDR ETF (NYSE:XLE), which tracks some of the strongest companies in the oil patch.
You can also add exposure to commodities through commodity-linked currencies. My favorite of these are the Canadian dollar and the Australian dollar. You can buy both of these easily through the CurrencyShares Canadian Dollar Trust ETF (NYSE:FXC) and the CurrencyShares Australian Dollar Trust ETF (NSYE:FXA).
And finally, you can buy exposure to fast growing emerging stock markets. For obvious reasons, one of the best inflation-fighting emerging markets is commodities-rich Russia.
Since I first recommended Russia through the Market Vectors Russia ETF Trust (NYSE:RSX) last August, it’s up a whopping 40%.
Since I first recommended SGOL, FXC and FXA last October, these positions are up 5.6%, 4.9% and 6.4% respectively. And since I recommended XLE in March, it is up 7.1%.
These gains come as no big surprise. They coincide with the biggest experiment in money printing from the Fed the world has ever seen.
They remain great ways to protect yourself in an inflationary world.
Positions of 2% – 3% of your total portfolio in each will help continue to offset the wealth-eroding effects of inflation.