I know you're feeling it. We all are. Prices are going up. The inflation rate reported in May was 8.6%, the highest it's been since the early eighties. And so your question might be what do I do? How do I respond to this increase in prices for so many things you and I pay for?
First of all, I guess I'd like to point out the positives of what we can take advantage of. I keep my excess savings in Ally Bank which has gone up to just under 1% of an interest rate paid on the balances I hold at the bank. You also may find that you're getting paid more for holding cash. So make sure that you are finding a bank that pays you something for your balances and that is raising rates in response to the new inflationary environment.
I'm also recording this video on a day that the market is down a lot and there are ways to take advantage of that. You can write off each year up to $3,000 of capital losses against your income. So make sure that you're taking advantage of this by harvesting losses in your taxable account. And what I mean by that is you sell a security that's down, replace it with a similar security so you don't miss any rally that might take place but the IRS considers it a different security.
Another thing you might consider is doing some Roth conversions. I wouldn't do this without talking either to your accountant or to your financial planner but sell some of your tax deferred accounts, move it into a Roth account, pay taxes now when frankly the value of that account may be down. If you're already collecting Social Security Social Security is actually adjusted each year for the inflation rate so your Social Security will go up in this current more inflationary environment.
Another thing I've been recommending that all my clients who hold excess cash due is to purchase I bonds. These are government bonds that every six months the coupon that is paid on the bonds is adjusted for inflation every May and every November the coupon is reset. Recently it was reset to just under 10%.And this is for government risk, which is a relatively low risk. The caveat is you can only purchase per person up to $10,000 a year per couple of $20,000 a year. This is something to certainly take advantage of. I've pointed out the positive ways we can take advantage of this high inflation ,of course, check your spending.
See how your fixed expenses each month may have gone up. Perhaps your cable bill is up, perhaps your phone bill is up. Certainly gas and groceries have gone up in price and you may have to adjust your spending in response to this. I am happy to answer any questions you might have. My name is Laura Rotter from True Abundance Advisors and I'm always happy to answer your questions and work with you to help you live your life on purpose.