Inflation Impact on Savings and Investments - The Federal Reserve aims to maintain inflation around 2%, but current inflation is leaning toward 3%, negatively impacting savings and investments [1][2] - Inflation erodes the "real return" on investments, meaning that even positive nominal returns can result in negative real returns when accounting for taxes and inflation [3][5] - At 3% inflation, $10,000 loses nearly $300 in purchasing power annually, highlighting the significant impact of even small inflation rates [3] Financial Products and Returns - High-yield savings accounts (HYSAs) and certificates of deposit (CDs) often fail to provide returns that outpace inflation, especially when inflation spikes [4] - It is crucial to compare after-tax, after-inflation real returns when evaluating savings and investments, particularly for retirees who need to sustain purchasing power over time [5] Wage Adjustments and Inflation - Companies may not provide raises that keep pace with inflation, and some do not offer annual raises at all [6] - Employees are encouraged to negotiate pay adjustments based on the consumer price index (CPI) to ensure income aligns with inflation [6]

Core Viewpoint - The surge in insurance purchases in Hong Kong is driven by the impending regulatory change that will lower the illustrated yield cap for participating insurance policies from 7% to 6.5% starting July 1, 2023, leading to a rush among mainland clients to secure policies before the change takes effect [1][7][12]. Group 1: Market Dynamics - The number of mainland clients traveling to Hong Kong for insurance has significantly increased, with reports of long queues at insurance companies as clients rush to finalize their policies before the new regulations [2][5][6]. - Insurance agents are capitalizing on the "last window period" narrative, promoting the urgency to purchase policies with higher illustrated yields before the regulatory change [9][10]. Group 2: Regulatory Changes - The Hong Kong Insurance Authority has issued guidelines that will limit the illustrated yield for Hong Kong dollar participating policies to 6% and for non-Hong Kong dollar policies to 6.5%, effective July 1, 2023 [7][10]. - The new regulations aim to address the significant gap between high illustrated yields and actual returns, as many policies have not met their projected performance [11][13]. Group 3: Product Performance - Despite the high illustrated yields, actual performance data shows that around 40% of participating insurance products in Hong Kong have not achieved their projected returns, with actual dividend realization rates fluctuating between 85% and 107% [12][13]. - The long-term nature of these insurance products means that achieving the illustrated yields often requires decades, with some policies needing up to 100 years to realize the higher returns [14].