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Yechiel Roth CPA, CFP, PFS

Concerned about inflation

Question from a tax client:


"I believe there will be a lot of inflation soon. I have some extra cash that I would like to protect from inflation, does it make sense to use this money to pay down my mortgage so that the money doesn't lose value from inflation."


Answer:


This is a loaded question, there is a lot of uncertainty how everything will play out, additionally whether to pay of ones mortgage before saving is a discussion for itself, but lets for now only address the inflation, as that seems to be you concern.


If we are to have high inflation, then the value of your house would likely go up substantially in nominal dollars, your income, if you maintain your job and relative salary level, would also go up, your mortgage payment would however remain the same.


So the simple answer is that from an inflation concern you shouldn't be in a rush to pay off low interest long term fixed debt.

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