Here’s How to Guard Against Volatile Stocks and Soaring Inflation

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Uncertainty has a strangle hold on the stock market right now. Accelerating inflation and the Federal Reserve’s resolve to raise interest rates were already stiff headwinds for stocks. Now we have a major war underway in Europe that threatens to draw in NATO, meaning the U.S. military.

So, it’s no wonder stocks are off to the most volatile start this year than at any time since — gulp — 2008-2009! Volatility is most likely here to stay, and could even get worse, until these headwinds subside.

This means your retirement savings and years of careful planning are under threat of coming undone. The fact is, retirement planning involves making certain assumptions. And most of them are completely out of your control.

Two of the biggest factors many people make assumptions about are the stock market and inflation. Your carefully laid retirement plans could be destroyed by a sour stock market and soaring inflation if you’re not very careful.

But there is a simple and powerful way to deal with this uncertainty, secure your retirement nest egg, and protect yourself against becoming a victim of volatile markets and higher inflation.

Investors are re-learning this year that the stock market offers no guarantees.


Sure, on average, stocks have appreciated between 8% and 10% per year over the past century. But the average return masks a whole lot of volatility in between. In fact, markets have gone through very long stretches of time when stocks return next to nothing at all.

If you are saving and investing toward your retirement goals, or already in retirement now, then one of these long periods with no stock market appreciation can completely derail your retirement. Just take a look at this chart…


The last time inflation was a big problem, like it is today, stocks peaked in 1965, and investors didn’t get back to break-even on an inflation-adjusted basis until 1995.

Folks, that’s 30 long years of zero gains from the stock market. If you had the misfortune to retire in 1970, the money you had hoped would last for a lifetime in your golden years vanished into thin air.

The corrosive impact of inflation steadily reduced your purchasing power for years. Frequent recessions (grey bars in the chart above) sapped your income even more, with five economic contractions between 1965 and 1990 alone.

Your nest egg would have been worth substantially less than you bargained for. And this comes back full circle to your retirement planning and making realistic assumptions about it.

Last week, I pointed out that the so-called 4% rule has gone out the window considering current conditions. The notion that you won’t run out of money in retirement if you limit your withdrawals from your savings to just 4% per year may simply fall far short today.

Another myth about retirement savings is that if you save enough pre-retirement and invest it the “traditional” way, with a mix of stocks and bonds, you’ll have plenty of money to live on.

But you simply cannot make the same old “traditional” assumptions any longer.

Go to any website that provides a retirement calculator and you’ll see exactly what I mean. Here is a screenshot from the popular site Bankrate.com.


In the top-half of the calculator, you enter your own financial information and retirement savings data. I made some pretty generous estimates here compared to the average American saving for retirement:

1. We’re looking at a hypothetical 50-year-old (let’s call her Jane Smith) who wants to call it quits and start living the good life at the typical retirement age of 67.
2. Jane enjoys a yearly income of $100,000, plus I factored in a 2% increase. And she saves 8% of her income for retirement, which is the suggested amount. Note, the income is well above the median household income in America of just $67,521.
3. Jane’s current retirement savings are $250,000, which is once again more than double the amount that the average 50-year-old has saved for retirement, which is just $117,000 according to statistics.
4. Let’s assume Jane will only need about 80% of her current income during retirement.
5. Jane needs her retirement savings to last at least 30 years.

All these numbers are pretty much spot-on with what retirement planning experts advise. The income and savings amounts, as noted, are much higher than the average American, but let’s roll with it.

Now, here’s where the assumptions get not only tricky, but downright dangerous.

The bottom panel of the calculator has assumptions for investment returns and inflation. Plus, the checked box includes Social Security for Jane and her spouse in the equation.

The red arrows mark the most dangerous assumptions of all: That Jane will…

• Earn 7% per year on her retirement savings while still working.
• Enjoy more modest returns of 5% when retired.
• And that inflation will remain just 2% over this time horizon.

Two percent is of course, the Fed’s favorite target level of inflation. For many years, in fact, the Fed provided easy money conditions in an effort to push the inflation rate up to that level on a consistent basis.

But be careful what you wish for, because today’s inflation rate is 7.5%, the highest since the early 1980s, and rapidly climbing.

Now here’s the sad punch line to this hypothetical retirement story: Even making these generous assumptions, Jane runs out of money at 93. The advice from the calculator is: “You may need to save more.” I would say:

You may need to make more realistic assumptions about the stock market return and inflation estimates we see above.

I ran the calculator again assuming another lost decade for stocks. But being a generous guy, I still plugged in a 3% rate of return, which is far better than the inflationary 1970s.

I also plugged in an inflation rate of 6%. If that sounds too high, think again. Inflation averaged 6.8% during the 1970s.

The results of these more-realistic assumptions aren’t pretty.


In this more accurate retirement scenario, Jane goes flat broke at age 78. So much for the golden years.

And don’t forget, this includes not only $586,713 in savings at age 67, but also $65,467 per year from Social Security during retirement!

The bottom line is that in today’s environment of stock market uncertainty and accelerating inflation, you can’t make the same old assumptions and expect everything to work out right.

You’ve got to be proactive in finding ways to make the stock market pay you frequently in cash, every month or even every week. Then you should reinvest this income, not spend it.

Dividend-paying stocks are one good way to do this.

There are more than 150 U.S. stocks that have steadily increased their dividend payouts every year for the past quarter-century. Stocks like these offer you inflation-protected yield. That’s because they have consistently boosted their dividends to keep up with inflation over many years, through thick and thin.

Blue-chip, dividend-paying stocks are a good start. But they may not be enough. Dividends aren’t the only way you can earn consistent cash income from the stock market. In fact, it’s not even the best way.

There’s a better way to create your own dividends from the stock market.

Why wait around for a company to pay you a quarterly dividend (only four times a year) and hopefully raise their payout? Instead, there’s an easy way you can declare your own dividends any time you want.

This strategy gives you the chance to pull hundreds or even thousands of dollars of income out of the stock market on a regular basis. Every single month. Weekly, if you wish.

This critical briefing could not be more timely considering today’s uncertain stock market and soaring inflation. And I’ll show you step-by-step how you can potentially earn an extra $3,000 or more each week, “on demand,” no matter what the markets are doing.