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CNBC Report: Persistent High Inflation Forces a Growing Number of Older Americans to Make Tough Financial Choices

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Inflation used to be easier to ignore. It seemed to be a favorite topic of economists, who never stopped warning the public not to overlook the corrosive effects of inflationary pressures on household income and savings. But in more normal times, it was tempting to discount these warnings. After all, with inflation running at a paltry two percent, what’s the big worry?

 Well, that was then – this is now. Last year, inflationary pressures hit America with all the force of an economic pandemic, sending prices through the roof on everything from clothes to cars to computers to cat food. Today, with the rate of inflation stubbornly hovering at 6.4 percent, the “I-word” isn’t just an economic concept: it’s a painful and persistent threat.

 How are Americans, especially seniors, coping? According to this 2022 CNBC article by reporter Lorie Konish, inflation is having a profound effect on the economic behavior of older Americans. Many have been forced to make some tough financial choices amid today’s high inflation, with some taking steps they probably never could have imagined, such as running up credit card debt and seeking assistance from food banks and other service programs.

 Although this article appeared last year when the rate of inflation was running even higher, the financial pressures on retirees (and just about everybody else) remain, so we’re bringing this topic back for your consideration. Let’s look at the CNBC article, which is based on research performed by the Senior Citizens League.

Financial Security in Jeopardy for Many

According to a 2022 online survey reported by CNBC, many Americans approaching or already in retirement are worried about the current high prices doing damage to their financial security. The survey, conducted by nonpartisan senior group The Senior Citizens League, involved 3,056 participants, 96 percent of whom rely on Social Security as a source of income.

 In her CNBC report, Konish writes, “Half of respondents ages 55 and up have spent emergency savings in the past 12 months in response to high inflation, the survey found. Meanwhile, 47 percent have visited a food pantry or applied for benefits from the Supplemental Nutrition Assistance Program, or SNAP. Moreover, 43 percent have carried debt on a consumer credit card for more than 90 days.”

Responses to Inflation, Then and Now

Konish goes on to list actions that older Americans have taken in the past 12 months as a direct response to inflation. Statements below compare actions of older Americans in 2022 compared to 2021:

  • Spent emergency savings: up from 36 percent in 2021 to 50 percent of respondents in 2022
  • Applied for a pharmacy assistance program: up from 9 percent to 15 percent
  • Applied for assistance with Medicare costs: up from 11 percent to 20 percent
  • Sought support for food costs (food bank or SNAP): up from 22 percent to 47 percent
  • Sought relief from heating/cooling costs: up from 10 percent to 25 percent

 On top of all that, Konish adds, “About one respondent in five said they had depleted a retirement or savings account in 2o22.”

Rising Costs, Rising Debt

 According to the survey, older Americans are seeking help from anywhere they can get it, including assistance programs, depleting their retirement and savings accounts, and going into debt, especially credit cards.

 Konish writes, “Credit card debt was also a growing problem, with 43 percent of respondents reporting they had carried a balance for more than 90 days. Interest rates on credit cards are poised to go up after the Federal Reserve [recently] raised interest rates by 0.75 percentage points, the biggest hike in 28 years. That may not help older Americans who have taken on more debt to cope with higher prices.” (Rate hikes have slowed but are still a reality in 2023.)

 Mary Johnson, a policy analyst at The Senior Citizens League, explained, “When people are facing this type of inflation, those who have lower savings tend to be the ones who have to take on more debt to get the bills paid during the month.”

Some Relief in 2023

For Social Security beneficiaries, 2023 did bring some relief. In 2022, Social Security beneficiaries saw a hefty boost to their benefits – the largest in 40 years – with a 5.9 percent cost-of-living adjustment. But 2023 brought an even bigger COLA, with benefits rising by 8.7 percent, taking away at least some of the inflationary sting.

 At the same time, Medicare Part B premiums actually declined a bit. In 2022 the standard monthly premium was $170.10, but in 2o23 that came down to $164.90. That’s not a lot, but for seniors on fixed income facing other price hikes, it helps.

One Solution: Partial Retirement

A frequent talking point here on the Blog is the increasingly common scenario of retirees returning to work, either full or part time. Konish points out that this might be a way that many retirees are choosing to cope with the higher prices triggered by inflation.  

 “A [2022] retirement survey from Schroders found 69 percent of working Americans plan to work in retirement,” Konish writes in her CNBC report. “The top reason was to cover basic living expenses, cited by 56 percent of respondents; followed by the desire to stay busy, 51 percent; and to keep active and in good health, 49 percent.”

A Financial Dashboard Can Guide You

 Whatever the reasons and motives, it seems clear that building a healthy plan into your retirement is more important than ever. That’s why Rajiv Nagaich recommends a tool called a financial dashboard, prepared specifically for you by a qualified financial planner. The dashboard helps you see at a glance the impact of various spending, saving and investing strategies.

 “I appreciate the dashboard because it lets you run ‘what-if’ scenarios,” says Rajiv Nagaich. “What if your investments under-perform? What if tax rates go up? What if your assumptions about inflation prove too low, or too high? With a financial dashboard in place, you can see ahead, make adjustments, and face the future with far greater confidence.”

 If this sounds like the tool for you, or if you have questions, contact AgingOptions. We can refer you to a financial professional who can help you.

Breaking News: Rajiv’s New Book is Here!

We have big news! The long-awaited book by Rajiv Nagaich, called Your Retirement: Dream or Disaster, has been released and is now available to the public.  As a friend of AgingOptions, we know you’ll want to get your copy and spread the word.

 You’ve heard Rajiv say it repeatedly: 70 percent of retirement plans will fail. If you know someone whose retirement turned into a nightmare when they were forced into a nursing home, went broke paying for care, or became a burden to their families – and you want to make sure it doesn’t happen to you – then this book is must-read.

 Through stories, examples, and personal insights, Rajiv takes us along on his journey of expanding awareness about a problem that few are willing to talk about, yet it’s one that results in millions of Americans sleepwalking their way into their worst nightmares about aging. Rajiv lays bare the shortcomings of traditional retirement planning advice, exposes the biases many professionals have about what is best for older adults, and much more.

 Rajiv then offers a solution: LifePlanning, his groundbreaking approach to retirement planning. Rajiv explains the essential planning steps and, most importantly, how to develop the framework for these elements to work in concert toward your most deeply held retirement goals.

 Your retirement can be the exciting and fulfilling life you’ve always wanted it to be. Start by reading and sharing Rajiv’s important new book. And remember, Age On, everyone!

(originally reported at www.cnbc.com)

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