How $1.9 Trillion Stimulus Could Pummel Your Retirement

Tomorrow’s inauguration will go down as an important day in American history.

I still have vivid childhood memories of when George H. W. Bush was inaugurated in 1989.  

My mother let us take the day off from school and watch the fanfare on our fuzzy television with the rabbit-ear antennas.

“You’re witnessing one of the most beautiful sights in history,” my mom said. “The peaceful and orderly transfer of power.”

I was too young at the time to truly appreciate the significance of the moment.

But this inauguration day will certainly put the significance of that day in 1989 into perspective.

I still hope that we can have a peaceful transfer of power in Washington, even if the background dynamics are much different.

But even after the inauguration, I’m worried about how political strife and big policy changes will affect our lives. 

And in particular, I want to spend time this week talking about how a new shift in Washington could affect your retirement.

So for the next few days, I’ll share my perspective on how the new administration’s upcoming policies will change the way we plan for retirement.

Let’s jump into part one of our series!

Related: Winners (and Losers) as a Blue Wave Sweeps Washington

A New “American Rescue Plan” in the Works

Last week, the Biden administration unveiled its recommendation for a new $1.9 trillion stimulus relief package.

The proposal includes a lot of moving parts. And they’ll all need to be debated by Congress before they go into law.

But given the Democrats’ majority in the House, the split in the Senate and Vice President-Elect Harris’ tie-breaking vote, it’s likely that the major points of this relief package will remain intact.

Here are the biggest items in the package that you need to be aware of:

• Individual payments of $1,400 per person will be deposited into Americans’ bank accounts.

• An increase in the minimum wage to $15 per hour.

• Raising the earned income tax credit.

• Increasing extra Federal unemployment benefits to $400 per week and extending the expiration date from March through September.

• Increasing the child tax credit by 50% to $3,000 per child — plus adding another $600 for children under the age of 6.

To see the full proposal, you can view Biden’s “American Rescue Plan” fact sheet here.

I want to make it clear that at this point, we’re not debating the merits or necessities of any of these payments. 

As my team spends more time digging into the details, we may have more thoughts on the effectiveness of certain aspects of the proposal.

But for now, I simply want to explain what this package could do to your retirement savings. 

And I want to let you know right away so you have time to set up a plan before the situation starts to play out.

A Perfect Storm to Spark Inflation

As I look through the events of the past year and see this proposal from the Biden administration, I have to tell you that alarm bells are going off in my head.

The personal payments listed above (along with many more dollars earmarked for businesses and other interests) will undoubtedly cause a surge in demand for goods and services.

That’s kind of the point, after all… Flood the economy with cash so that people buy things and drive economic activity.

But here’s the rub…

For this version of stimulus payments, there’s more emphasis on paying individuals and less on growing employment. 

In fact, some argue that this package creates a disincentive for people to work because they’re being paid an equivalent wage simply to stay at home.

Now I know that the second wave of coronavirus is a major concern. And there may be a perfectly logical reason why this disincentive to work is in place.

But think about what happens when the government gives people money to buy things but makes it tougher for companies to produce things.

Whenever you have more money chasing fewer available resources, the prices of those resources are bound to move higher. That’s what inflation is all about!

So in the year ahead, I expect to see inflation kick in for the American economy. 

And whenever you have a rise in inflation, it means the savings you’ve worked so hard to set aside will buy fewer things.

That’s bad news for your retirement!

That’s why this week, I want to sound the alarm for your retirement and help you with the tools to protect your capital. 

More importantly, I want to help you protect your spending power so that even with inflation coming into our economy, you’ll still be able to buy the things you need —- and the things you want, too!

Tomorrow, I’ll give you a dire warning about an investment you probably already have in your retirement account. 

It’s something that no traditional wealth manager will ever tell you. (At least none that I’ve met personally — and I talk to these guys every day!)

I’ll also share one off-Wall-Street place that you can invest your retirement wealth to offset the risks of inflation and grow your spending power. (Hint: It’s not gold or any other precious metal — and it’s not Bitcoin, either!)

Please know when I talk about these risks, it’s because I care deeply about your retirement. 

I understand the challenges that the new administration faces in trying to help our economy grow. And I don’t envy the decisions the Biden administration will have to make.

But regardless of what decisions are made in Washington, I want to make sure that your retirement is protected so that you can live a Rich Retirement and focus on the things that really matter to you.