Americans must face the hard reality that the value of the dollar will be worth less in the future than it is today. The primary concern for retirees is how inflation impacts future purchasing power, especially in the healthcare industry as well as food, gas and home energy prices.
It is not just rising prices, but also the actual money that retirees stand to lose that cause financial anxiety among the elderly. LIMRA Secure Retirement conducted research that shows if inflation increases to 3%, the average retiree stands to lose $117,000.
To counteract these affects, a cost-of-living adjustment (COLAs) will be made to Social Security benefits in 2022. Next year, the monthly federal Supplemental Security Income (SSI) payment standard will be $841 for individuals and $1261 for couples, according to news recently shared by the Social Security Administration. Unfortunately, these COLAs are not as effective as they need to be. One reason for this is that the COLA increases are tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CIP-W). This index does not measure the same types of items that seniors purchase. Seniors spend money on food, housing and healthcare. All of these areas are prone to increase in price more and faster than many of the expenses tied to CIP-W.
What Can the Elderly Do to Minimize the Impact of Inflation?
1. Reduce housing costs. Downsizing can help lower housing payments, energy costs and save on taxes and insurance.
2. Talk to a financial advisor about risk assessment. While seniors typically stick with low risk investments, it may help to bump up the risk to attempt to outpace the inflation. A financial advisor can run the scenarios and provide a helpful strategy.
3. Create a budget. Many seniors tend to upgrade their lifestyle during retirement. Most retirees spend more than they did before they retired. This may be due to more free time which is why establishing a budget and sticking to it is especially important during these difficult economic times.
Not only does inflation affect the elderly by decreasing their purchase power, forcing them to live on a more realistic budget and increasing the amount that must be pulled from retirement assets, it also has a big impact on their quality of life and mental health. Worrying about having enough money can cause many seniors to experience symptoms of anxiety and depression. Younger generations may also worry, but they also know they still have earning power. Once you lose earning power, you are truly dependent on government benefits and the money saved from earlier years.
Getting objective, sound advice is the best way to alleviate the worry. The estate planning attorneys at Stouffer Legal can help assess the situation and work with financial advisors to develop a comprehensive retirement plan that includes budgeting, estate planning and long-term care planning. For more information contact our firm in the Greater Baltimore area for a consultation. You can schedule an appointment by calling us at (443) 470-3599, emailing us at office@stoufferlegal.com, or register for an upcoming free webinar using the link below:
https://attendee.gotowebinar.com/register/6703430342930774543
https://attendee.gotowebinar.com/register/6062932933914417935
https://attendee.gotowebinar.com/register/3934427956163075852
https://attendee.gotowebinar.com/register/3571666084810971404
