Why is this year different from all other years for seniors? Inflation. The latest numbers show a whopping inflation rate that’s the highest since 1982. This means that everything you buy will be more expensive. You see this impact at the gas pump, the grocery store, the doctor and, frankly, all over. The issue is that you don’t have a choice not to buy certain things.
It’s interesting, because, we sort of have a love-hate relationship with our financial world. We love that the economy is back roaring at a full-employment rate and that almost anyone can get a job if they want one. We also love that wages are going up and that we are back in the car and eating out and traveling. But at the same time, we hate that this growth breeds inflation, resulting in costs for everything rising. We also may support the Ukrainians in their war with Russia , but we hate the costs to us. Why Are Seniors More Affected by Inflation?
There are several reasons why inflation is harder on seniors than others. Let’s start with the fact that most seniors live on a fixed income. Inflation is not an abstract idea … it’s real. The income you get can come from many sources, including Social Security. It should be noted that a cost-of-living-adjustment (COLA) is built into Social Security. In fact, this year there was a 5.9% bump . This translates into the average Social Security benefit in 2022 getting boosted to $1,657 per month, up $92. This sounds great, but the annualized inflation rate is running at 8.6% over the past 12 months , the Bureau of Labor Statistics reported on June 10. That more than wipes out the Social Security benefit increase.
Seniors with conservative portfolios are also seeing a hit to their savings and investments. It’s prudent to be invested conservatively as you age because you shouldn’t be taking big risks. But these conservative lower returns also mean that inflation will hit you harder as you have less to spend on goods and services that are rising in price.
But let’s face it: As seniors, you have “been there and done that.” You’ve gotten through tough times before, and you can do it again.
To help you along, here are some tips to lessen the hit inflation is taking from your income. Tip No. 1: Be Smart about When to Claim Social Security
If you can, delay claiming Social Security. You may increase your benefits by 8% for each year you wait to retire, up to age 70. Claiming your Social Security at 62 could mean a 30% reduction of your benefits. If your full retirement age is 66, you will get 100% of your monthly benefit if you start claiming then. If you delay until you are 70 you will get 132% of your monthly benefit. One way to help you in your effort to delay claiming is obvious, but bears mentioning: Work longer. Working longer boosts your Social Security benefit in many ways. Tip No. 2: Get Creative with Your Spending
There are only two ways to really ease the burden: Earn more or spend less. Earning more may not be an option, but you can always figure out how to spend less.
It’s time to look at your budget. Go over your current spending, line by line. Really decide if each item is a want or a need. You need to know your expenses, and you really need to examine them. Obviously, you are paying a fixed amount for rent or mortgage, for instance. But you have lots of discretionary spending, as well. Things like:
Eating out at work: No matter where you are going, eating out will cost more. Even if you are only spending, let’s say, $10 a day, five days a week, that will be $2,600 a year. Figure out how much you are spending and conversely, what it would cost to buy food and cook at home.
Coffee: You hear about taking your own coffee, and it may not seem like a big deal. But you can easily spend $70 a month, which adds up to $840 a year.
Subscriptions: Many subscriptions are on auto pay. Look at these subscriptions and see if you are using them (ot even want them).
Buying name brands: Try to switch to generic brands. It will save you a lot of money. Tip No. 3: Enjoy Life, Because It Could Be Long!
Plan smart by not running out […]
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