And these are pretty big changes! In fact, Newsmax called the 401(k) contribution cap “the biggest increase ever to the limit, by percentage and dollar terms.”

That is certainly welcome news for savers who are trying to put away enough of their hard-earned dollars tax free, so they can enjoy a stress-free retirement.

According to advice from U.S. News, employees should also make a note to check this amount every year:

"The main thing for employees to know at the beginning of the year is what their maximum allowable contribution is," says Eric Maldonado, a certified financial planner for Aquila Wealth Advisors in San Luis Obispo, California. "Then update your percentage or dollar-based employee deferrals to automatically fund your 401(k) each pay period."

Sounds like good news all around, and common-sense advice for employees to follow.

But there is still one glaring problem.

As the IRS states:

IRC Section 415 requires the limits to be adjusted annually for cost-of-living increases.

In other words, that “biggest increase ever to the limit” is only an adjustment for inflation!

Subsequently, it’s absolutely impossible to predict what the dollars we’re saving today will be worth by the time we retire…

Today’s dollars aren’t going very far – what about tomorrow’s?

The latest update from the Bureau of Labor Statistics (BLS) reports that prices are still rising across the board, 8.2% higher overall compared to last year.

And when I say “across the board,” I’m paraphrasing the official report:

Increases in the shelter, food, and medical care indexes were the largest of many contributors to the monthly seasonally adjusted all items increase. These increases were partly offset by a 4.9-percent decline in the gasoline index. The food index continued to rise, increasing 0.8 percent over the month as the food at home index rose 0.7 percent. The energy index fell 2.1 percent over the month as the gasoline index declined, but the natural gas and electricity indexes increased.

Good news! Gas got cheaper (but is still 18.2% more expensive than last year).

Bad news… everything else got significantly more costly, more than wiping out the declines in energy prices.

That’s just one month, right?

Well, yes and no… If we look back over the past two years, we’ll see that the consumer price index (CPI, also known as “headline inflation”) first exceeded the Federal Reserve’s target of 2% back in March 2021 – and only recently showed any sign of plateauing…

Now, why does this matter?

In terms of next month’s electricity bill, it probably doesn’t (unless you live in Germany, up 105%, or the UK, up 80% this year). Even if you’re on a fixed income, hopefully your cost-of-living adjustments will catch up to your expenses.

Let’s take a longer-term view.

When we’re talking about saving for retirement, though, we’re projecting decades into the future. Even Americans in retirement who aren’t actively contributing to their savings have to consider whether their money will last as long as they need it to.

When we have price stability, we have a reasonably firm foundation for future projections. That’s why the Fed maintains a target rate of inflation. We can argue all day over whether 2% is the right target rate… As long as it’s consistent, as long as we can count on it, the rate itself doesn’t particularly matter. The prudent and the wise will plan for it.

Today, right now, we don’t know how long inflation will continue to run hot. The Federal reserve doesn’t know. (They told us it was “transitory” and “supply chain snarls,” remember?)

The Biden administration doesn’t know. In fact, during his 60 Minutes interview, President Biden actually admitted this:

Interviewer Scott Pelley: And you would tell the American people that inflation is going to continue to decline?

President Joe Biden: No, I'm telling the American people that we're gonna get control of inflation.

Now, “gonna get control of inflation” can mean any number of things – suffice to say, I’m not confident that an administration that’s racked up over $4 trillion in debt in just two years has any plan beyond spending America into prosperity.

News flash: printing more money doesn’t make more wealth. All it makes is inflation.

That means the contributions you’re making to your 401(k) plan must account for inflation, over and above paying your bills. If inflation rose 8.2% over last year, and you didn’t increase your retirement savings contributions to match, you’re already falling behind.

And who knows how the situation will look a decade from now? If we look back over the last six decades, CPI has averaged 3.8% annually. Kiplinger hopes inflation will subside to this long-term average by next year – I hope they’re right about this, though I seriously doubt it.

It’s a complex situation with few certainties. There’s no getting around it.

Fortunately, you still have options.

One option: keep your retirement savings simple

If you’re looking for alternative ways to prepare your savings for retirement, one possible solution would be to learn about safe haven assets.

“Safe havens” can protect your money and preserve your buying power while inflation is high. Diversifying your savings with crisis- and inflation-resistant investments can help smooth out market volatility. The dollars you invest in safe havens or inflation-resistant assets are much more likely to retain their purchasing power years and decades into the future, regardless of CPI fluctuations.

Take a moment to examine your own retirement savings plan, and see whether you can project your future expenses in future dollars. If that’s too much an exercise in crystal-ball gazing for you, consider a simple and flexible alternatives like a Precious Metals IRA. That’s the only way to add the historic safe-haven assets of physical gold and silver to your retirement savings.

Furthermore, physical precious metals are easy to understand. They don’t have multi-volume prospectuses attached. You don’t need to investigate balance sheets or quarterly earnings reports. You either own them, or you don’t.

It’s a whole lot easier to plan for the future when you know you have intrinsically-valuable, tangible assets whose value isn’t subject to the Federal Reserve’s money-printing.
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Peter Reagan is a financial market strategist at Birch Gold Group. As the Precious Metal IRA Specialists, Birch Gold helps Americans protect their retirement savings with physical gold and silver. Based in the Los Angeles area, the company has been in business since 2003. It has an A+ Rating with the BBB and hundreds of satisfied customer reviews.