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03-17-2013, 02:09 PM
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#1
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Confused about dryer sheets
Join Date: Feb 2013
Location: Fernandina Beach
Posts: 2
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Currency devaluation?
Hi I am Stephen M. My wife and I have been in retirement for 13 years. Our current combined retirement assets amount to $2,109155 ($1,174,020 deferred and the balance taxable). We have been living off recent SS and Pension income coupled with withdrawals averaging 2%. I have been very concerned about national debt ($16T?), and, naturally, deficits. I am particularly concerned about massive devaluation of our currency and would appreciate views on this subject.
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03-17-2013, 02:19 PM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,021
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Stephen, other than being concerned, what are your views on the subject?
__________________
Numbers is hard
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03-17-2013, 02:56 PM
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#3
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Recycles dryer sheets
Join Date: Oct 2012
Location: Salt Lake City, UT
Posts: 329
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I'll jump in!
The trend has been to effectively print money to fulfill the needs of the US treasury's deficit. With the Federal Reserve's coordination, this printed money is flowing into assets; real estate and equities.
Given that US deficits are projected to continue for the next 10 years, I expect this asset inflation to continue.
Equities at this level can be perceived as risky, but bonds clearly are. And cash is not a safe haven.
So yes, the dollar's buying power is depreciating. But it seems that a balanced portfolio is probably keeping constant buying power... and is possibly increasing in buying power.
I suspect an Asset allocation of 60-40 is necessary to ride this out.
With your portfolio, SS and pension income, you seem to have a well diversified income stream and should endure whatever does happen better than most.
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03-17-2013, 03:39 PM
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#5
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Recycles dryer sheets
Join Date: Aug 2011
Location: GA
Posts: 211
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I don't see any massive devaluation yet, and there's not much I can do about it except diversify my investments according to plan which includes a healthy portion of international equities. If it happens, I would expect a nice manufacturing boom in the US as our exports become cheaper to the rest of the world. But since my retirement plan involves moving overseas, I do worry a little about having an unfavorable exchange rate. But again, not much I can do about it.
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03-17-2013, 04:14 PM
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#6
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Thinks s/he gets paid by the post
Join Date: Nov 2011
Posts: 3,902
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Since currency devaluation is the politically-easiest way deficits can be overcome, it will probably continue for many years. As the dollar devalues, your pre-tax retirement account's nomimal value increases, but that's a phantom increase since the account's real value might remain steady. The problem is that upon RMDs you pay tax on that phantom increase. Post-tax dollars, such as those in Roth form, avoid the tax on phantom increases.
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03-17-2013, 09:22 PM
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#7
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Thinks s/he gets paid by the post
Join Date: Apr 2006
Location: North Bay
Posts: 1,251
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I worry about devaluation of the dollar due to the large and growing debt also. A friend I was talking to about this recently asked a good question about devaluation....devaluation relative to what? What currencies and/or economies don't have their own problems if the dollar goes into a nosedive? The euro? The yuan? All the big currencies are tied in to the dollar as major trading partners so that if the US buying power drops drastically, so do their economies. So what international investment is a good hedge against the downfall of largest import market in the world?
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03-18-2013, 01:43 AM
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#8
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Confused about dryer sheets
Join Date: Feb 2013
Location: Fernandina Beach
Posts: 2
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Thanks
Specifically I am concerned that holders of this debt might easily feel insecure and cease future buying of it resulting in eventual pandemonium in the markets.
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03-18-2013, 02:26 AM
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#9
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Full time employment: Posting here.
Join Date: Mar 2011
Posts: 534
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The dollar index devalued significantly from 02 to 08 but has been stable since then. (in fact its higher now than before the crisis)
DXY00 | Commodity Futures Price Chart for U.S. Dollar Index Cash
Devaluation and inflation are not large concerns of mine. Having said that, most of my fixed income allocation is in TIPS.
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03-18-2013, 02:27 AM
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#10
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Full time employment: Posting here.
Join Date: Mar 2011
Posts: 534
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And welcome!
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03-18-2013, 05:03 PM
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#11
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Thinks s/he gets paid by the post
Join Date: Sep 2010
Location: midwestern city
Posts: 4,061
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Welcome to the forum. Like you, I am very concerned about the $ in the long term. This is why I am keeping significant amounts of money in the EU.
Quote:
Originally Posted by StephenM
Hi I am Stephen M. My wife and I have been in retirement for 13 years. Our current combined retirement assets amount to $2,109155 ($1,174,020 deferred and the balance taxable). We have been living off recent SS and Pension income coupled with withdrawals averaging 2%. I have been very concerned about national debt ($16T?), and, naturally, deficits. I am particularly concerned about massive devaluation of our currency and would appreciate views on this subject.
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__________________
Very conservative with investments. Not ER'd yet, 48 years old. Please do not take anything I write or imply as legal, financial or medical advice directed to you. Contact your own financial advisor, healthcare provider, or attorney for financial, medical and legal advice.
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