“Inflation is the silent killer” as many retirees really feel the sting
Jeffrey Coolidge | Getty Images
Rising inflation worries Kevin Linehan, 68, a retiree in Fitchburg, Massachusetts.
After a heart attack at the age of 44, Linehan ended his career at the Post prematurely and opted for a reduced pension income in the event of disability.
“It wasn’t the best financial thing,” he said. “But at the time, my life seemed more important than my job.”
Although it was difficult to survive on a “tight income,” Linehan, an Air Force veteran, secured government-subsidized housing for less than $ 500 a month through Veterans Affairs. The rent remains relatively stable from year to year, with annual increases depending on income.
More from Personal Finance:
How to Create an Inflation Strategy Using Muni Bonds
How climate change is affecting retirees’ portfolios
Here is one option to protect your portfolio from inflation
However, in recent months, Linehan has seen the prices of everyday goods such as groceries and gasoline rise. He’s seen higher costs for staples like bread and milk. There were also steady increases in gasoline prices, which limited his ability to travel.
“It’s like we’re coming over now [the pandemic] Everyone is driving prices up, “he said.
Rising food costs are particularly worrying for Linehan, who receives monthly benefits from the Supplemental Nutrition Assistance Program known as SNAP. While SNAP benefits have increased during the pandemic, he expects them to decline to $ 16 a month once the state’s Covid-19 aid expires.
“I don’t know how much longer [the extra benefits] will take a while, but that helped me a lot, “he said.
The May Consumer Price Index, which measures the cost of food, housing, gasoline, utilities and other goods, is up 5% year over year, according to the Department of Labor. Food prices are up 2.2% in the past 12 months and gasoline prices are up 56.2% after recovering from pandemic slumps.
While Federal Reserve officials have said these price hikes are temporary, retirees like Linehan are still concerned that prices will go up.
Inflation is the silent killer.
President of Seaside Wealth Management
American inflation expectations rose to 4% in May for the seventh straight monthly increase, according to a report by the Federal Reserve Bank of New York.
“Inflation is the silent killer,” said certified financial planner Brad Lineberger, president of Seaside Wealth Management in Carlsbad, California. “It can erode purchasing power to the point where someone wakes up and can no longer live the lifestyle they once lived because they can’t afford it.”
No problem for all retirees
Although rising prices have alarmed many retirees, others are not feeling the effects.
“Our clients were not badly affected by the temporary spurts of inflation,” said Jon Ulin, CFP and CEO of Ulin & Co. Wealth Management in Boca Raton, Florida.
Diane Benson, 69, and Al Sapienza, 70, in Seattle are among those retirees who haven’t felt the sting of inflation. After selling their home in suburban Boston, the couple moved to Seattle in 2019 to live near their 40-year-old son, David.
Sapienza retired from his 25 years with the Social Security Agency and switched to higher education before leaving his full-time position in 2015.
Al Sapienza and Diane Benson.
Source: Diane Benson
Benson retired from her social work career in 2007 and chose to spend more time with her ailing mother. Your loss of income is not an issue, she said.
“We never really went beyond what we could afford,” said Sapienza. “Actually, we probably lived way below that.”
Although they noticed the rise in prices, inflation “in no way” affected their finances, he said.
Adjustment of the cost of living
Inflation can be a challenge for those on a steady income. However, Benson and Sapienza are both receiving pension and social security payments and both with cost of living adjustments, Sapienza said.
While changes in social security payments have been modest in the past, creeping prices have raised estimates for the social security cost of living adjustment to 5.3% in 2022, the largest increase since 2009, according to the Seniors League.
“This year prices will go up and their benefits will not go up immediately to make up for it, but they will go up in 2022,” said Alicia Munnell, director of the Center for Retirement Research at Boston College.
Benson and Sapienza also have unused retirement accounts and plan to wait until the age of 72 to start withdrawing the funds.
The so-called three-legged chair of retirement income – pension, retirement accounts and social security – is less common among retirees. According to the National Institute on Retirement Security, only 6.8% of older Americans receive income from all three sources.
How to fight inflation
While some retirees may be concerned about rising prices, there are ways to minimize the impact, said Jeffrey Tomaneng, CFP and investment advisor at Asset Management Resources in Hyannis, Massachusetts.
For example, he encourages clients to review their portfolios with the option to move a percentage to more aggressive assets, he said.
The parents of some customers are now over 90 and have little savings. But a little more portfolio risk 20 or 30 years ago would have improved their situation today, added Tomaneng.
“We like to remind our clients that they can’t get too conservative in their asset allocation too soon because they need stocks to stave off inflation,” Lineberger said.
Cut down on expenses
Kevin P. Linehan
Courtesy: Kevin P. Linehan.
Inflation can be onerous for retirees without a nest egg, but there can be creative ways to offset the effects. You might consider moving or exploring common life situations with family or friends, Tomaneng said.
However, those looking to downsize and shop elsewhere may prefer to wait depending on the market, Ulin said.
For example, the influx of transplants and limited homes have resulted in a 10-20% increase in residential construction in South Florida.
Of course, not everyone has the resources or the desire to move away from family.
After many years in more affordable areas, Linehan returned to Massachusetts after the death of his wife. Now he lives close to his sons and four grandchildren and is relieved that his family is close in an emergency.
Despite rising prices and cuts in SNAP services, he is confident that he will make it.
“I’m fine for someone who doesn’t have a lot of income every month,” he said.