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CNBC Report: Record 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 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. Inflationary pressures have 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. Suddenly, with the rate of inflation soaring past 8 percent and still climbing, the “I-word” isn’t just an economic concept: it’s a painfully real threat.

How are Americans, especially seniors, coping? According to this recent 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 record 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. 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 recent online survey reported by CNBC, many Americans approaching or already in retirement are worried about the current record 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 InflationThen 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.”

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 May be on the Horizon

For Social Security beneficiaries, 2023 may bring some relief. “Social Security beneficiaries saw the biggest boost to their benefits in about 40 years in 2022, with a 5.9 percent cost-of-living adjustment,” Konish writes. “The Senior Citizens League has estimated next year’s COLA could be 8.6 percent, based on the latest Consumer Price Index data.”

But she adds, “How high Medicare Part B premiums are for 2023 will also make a difference for beneficiaries who are watching their wallets. This year, the standard monthly premium is $170.10, a 14.5 percent increase from the previous year prompted in large part by the potential cost of covering Alzheimer’s drug Aduhelm.” (We wrote about this issue recently on the AgingOptions Blog.)

It is worth noting that since the cost of Aduhelm has since been cut in half, Medicare Part B premium increases may be adjusted next year to compensate.

One Solution: Partial Retirement

A frequent talking point here on the AgingOptions 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 recent 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.

My Life, My Plan, My Way: Get Started on the Path to Retirement Success

At AgingOptions we believe the key to a secure retirement is the right retirement plan – yet statistics show that 70 percent of retirement plans fail. That’s why for nearly two decades we’ve been dedicated to the proposition that a carefully-crafted, fully comprehensive retirement plan is the best answer to virtually any contingency life may throw your way as you age.  Our slogan says it all: My Life, My Plan, My Way.

When it comes to retirement planning, most people focus on one fairly narrow issue: money. Financial planning is an important component of retirement planning. However, people heading towards retirement often make the mistake of thinking that a little financial planning is all that’s required, when in fact most financial plans are woefully inadequate. What about your medical coverage? What if you have to make a change in your housing status – will that knock your financial plan off course? Are you adequately prepared legally for the realities of retirement and estate planning? And is your family equipped to support your plans for the future as you age?

The best way we know of to successfully blend all these elements together – finance, medical, housing, legal and family – is with a LifePlan from AgingOptions. Thousands of people have discovered the power of LifePlanning and we encourage you to the same. Simply visit our website and discover a world of retirement planning resources.  Make certain your retirement planning is truly comprehensive and complete with an AgingOptions LifePlan.  Age on!

(originally reported at www.cnbc.com)

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