Groceries or rent? Medicine or public services? Financial experts say record inflation will increasingly force seniors on fixed incomes to make such choices.
The consumer price index, which rose 7.9% in February over the previous 12 months, exceeds Social Security’s annual cost-of-living adjustment for inflation, warned Wednesday retirement planners and economists.
In addition, inflation erodes the relative value of seniors’ investments and savings, reduces their purchasing power and diminishes the material quality of their lives.
“Older Americans are getting hammered right now,” said economist Victor Claar, a professor at Florida Gulf Coast University. “And for many, the crisis is already here.”
Social Security recipients saw a record annual increase of 5.9% in January and could get another 7.9% increase next year, but overall food prices rose 1% and prices 1.5% home food. The cost of rent and clothing also increased in February.
“The largest increase in Medicare Part B premiums in program history has further eroded the impact of the Social Security adjustment this year,” said retirement planner Chris Orestis, president of Retirement Genius.
John A. Moore, chair of accounting, finance and economics at Walsh College, said seniors face the added problem of spending more of their income on consumer goods than other age groups. ‘age.
He pointed to a 2016 article from the Bureau of Labor Statistics showing that people aged 65 to 74 spent 75% of their income on housing, food, transportation and healthcare costs before COVID-19.
“Inflation is a hidden tax on the poor and old,” Moore said. “Their best hope is that policymakers make the hard decisions needed to bring inflation under control, just as Paul Volcker did in the late 1970s and early 1980s.”
Financial adviser Chris Murray, founder of Murray Financial Group, said older people should be aware of the overall cost of possessions.
“People are having to make decisions about buying groceries instead of gas in their cars with gas prices at record highs,” he said. “For people in retirement and on fixed incomes, they either eat more of their savings or sacrifice in other areas.”
Marc Scudillo, managing director of EisnerAmper Wealth Management and Corporate Benefits, said the changes might surprise some seniors.
“Retirees had long become accustomed to little or no change in their income needs from year to year,” Scudillo said. “These income requirements would remain constant for three to five years, and then a slight increase would be required for inflationary income adjustments so clients could maintain their lifestyles.”
Economist Judson C. Edwards, dean of Sorrell College of Business at the University of Troy, said older people should also consider sales taxes when deciding where to retire.
“One of the emerging issues of concern for retirees on low fixed incomes, which accompanies that of rising consumer goods prices, is the growing impact of state and local sales taxes,” he said. . “Although many Southern states are often cited as the best tax environments, those same states have some of the highest sales taxes in the United States.”
For example, he said groceries are taxed an average of 9.5% throughout Alabama, where he lives.
“It may not seem like much, but the longer inflation continues, the more it will eat into their monthly budget,” Mr Edwards said.