News

: Gas is going up, but this is how inflation really hurts older Americans

Inflation can be dangerous for anyone’s budget – but especially when that person is retired and living on a fixed income. 

The Consumer Price Index, a measurement of inflation, hit a 40-year high of 8.5% in March. The 1.2% increase was the largest uptick since 2005 after Hurricane Katrina. Costs of goods and services are rising everywhere, from supermarkets to gas stations and even the housing market. 

Many Americans are worried for their financial wellbeing. Inflation has the potential to erode any worker’s paychecks, as more of their earnings are going toward the same expenses they were already spending on. People have been quick to note the high gas prices when fueling up their vehicles, or how their food costs have skyrocketed – whether they’re buying groceries or ordering take-out. Shoppers can see the increased prices at various retailers and vendors as well. 

“When people living on fixed incomes don’t have savings, or can’t borrow, then they are in a very challenging situation that’s not safe,” said Mary Johnson, a Social Security policy analyst for the Senior Citizens League. 

See: Peak inflation? The worst may be over, but Americans to keep paying a high price

But just because inflation has hit a new peak does not mean everyone is affected in the same way. Seniors, for example, may not feel the burden of higher gas prices if they don’t have a car, or at least don’t drive often. They also wouldn’t feel the pains of home buying if they currently own their homes, have a fixed or no mortgage and intend to stay where they are for the foreseeable future.  

Where older Americans will feel a tightness from inflation is likely with their food, which has seen its largest increases since 1981 for meats, dairy and food prepared outside the home. Beef products are up as much as 20.4%, Johnson said, but even those who try to curb their grocery bills will feel the effects of inflation – chicken prices are up 13.4% and eggs are up 11.2%, Johnson said. Even dried beans, a source of “cheap protein,” are up 11.3%, she said. 

“The redeeming part there is to buy dry beans and cook your own,” Johnson said. “You usually can get almost 2.5 cups of cooked beans for each cup of dry. But as much as we all love beans, we need variety to have balanced nutrition.”

Still, someone relying on just Social Security, or who is trying to refrain from withdrawing from retirement accounts while the markets remain volatile, might find this high inflation worrisome. The average retiree benefit in 2022 is $1,656 or lower, Johnson said, which means those who use Social Security for most, if not all, of their retirement income may have to take on credit card debt. Some low-income Americans go so far as to forgo certain expenses, such as medications or doctor visits, in an effort to save money.  

Retirees may also not drive as much, but they still will feel the effects of rising gas prices by having to heat their home, Johnson added. 

Not all hope is lost. Social Security has a built-in cost-of-living adjustment, and last year’s was 5.9%, the largest COLA increase in 40 years, the Department of Labor said. The jump next year will likely be higher, said Marc Goldwein, senior vice president and senior policy director for the Committee for a Responsible Federal Budget. While this inflation can be difficult for people looking to buy homes, those who already have them have seen the value of their houses rise, he added. 

Also see: Planning for retirement? You should also plan for inflation 

Seniors living primarily off of Social Security have to wait until next year to see another cost-of-living adjustment, which can be problematic if their rents or grocery bills are skyrocketing. “If you’re already retired, you can’t put in more hours,” he said. “You’re stuck with what you’re stuck with.” 

The Social Security COLA is tied to the CPI-W, which tracks the consumer spending of urban workers. There is an index specifically for older Americans, known as CPI-E – legislators have proposed switching to that index for Social Security benefits, because it more closely resembles what seniors are spending on, such as healthcare. 

There’s a silver lining with having the COLA linked to CPI-W and not CPI-E this year, however, Goldwein said – the former was larger than the latter, which means their benefits increased more so than had benefits been tied to CPI-E.

What's your reaction?

Excited
0
Happy
0
In Love
0
Not Sure
0
Silly
0

You may also like

More in:News

Leave a reply

Your email address will not be published.