An important reminder of the need of careful financial preparation and forethought came this week when a policy expert suggested elders delay retirement if at all feasible since inflation is running higher than predicted levels.
Although this year’s Social Security COLA of 8.7 percent was adopted, many have expressed worry that it would not be enough to counteract growing inflation rates.
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“For one in four, it is more than 90 percent of their income in retirement,” Ramsey Alwin, the president of the National Council on Aging, said this week that those who are close to retiring should think about extending their working life if it is possible. His words reflected those of many others in the ever-changing economic environment and might be a helpful lesson for anyone looking for stability in their finances in these tumultuous times.
“Consider delaying Social Security,” Alwin observed that the financial benefits of delaying retirement increase with time. Up to the age of 70, their retirement income increases by 8% every year.
When it comes to retirement, the absence of access to occupational benefits presents a significant financial challenge to half of all Americans. Many are even adopting an unusual strategy by moving to places that provide more affordable alternatives for their senior years.
The cost of goods and services as a whole increased by 6.5% from 2021 and 2022, as measured by the consumer price index of the Bureau of Labor Statistics, reducing consumer spending power this past year. Since the inflation index started keeping track of these numbers, this is one of the sharpest price hikes that consumers have seen. “food prices increased 10.4 percent, reflecting an 11.8-percent increase in prices for food at home and an 8.3-percent increase in prices for food away from home,” said the federal agency.
The unemployment rate has just dropped to its lowest point since the beginning of 2022 as it continues to plummet. This trend is primarily attributable to the Federal Reserve’s ongoing rises in interest rates, as authorities announced yet another raise in its statement on Wednesday.
For Social Security recipients, the cost-of-living adjustment (COLA) increased sharply this year, rising to its highest level in approximately 40 years. The Social Security Administration states that COLAs are determined yearly and closely correlated with increases in the consumer price index.
“Anytime they go through a loss of buying power, that means they are exhausting other retirement resources, like savings, or may be putting more on credit cards, or they might turn to safety net programs,” Last year, Mary Johnson, a Senior Citizens League policy analyst with knowledge of Social Security and Medicare laws, provided her perspectives on COLA allocations for 2023.
She added: “We have just been through a period where retirees are trying to cope and manage, and they have never been through anything like this before.”
Potential Rise in Inflation
Mohamed El-Erian, a well-known economist, recently issued a warning about the significant effects that rising inflation will have on the world economy. By the end of 2021, he said there is a nearly 75 percent chance of either ongoing extraordinary growth or a surprise recovery.
“This would force the Fed to choose between crushing the economy to get inflation down to its 2 percent target, adjusting the target rate to make it more consistent with changing supply conditions, or waiting to see whether the U.S. can live with stable 3-4 percent inflation,” he said. “I do not know what the Fed would choose in such a case, but I would put the probability of such sticky inflation at 50 percent.”
Fraudsters are taking advantage of the newly announced Cost of Living Adjustment (COLA) for Social Security beneficiaries by impersonating Social Security Administration officials and erroneously asserting that people must start an application procedure in order to benefit. Be on the lookout for such fraudulent behavior!
“They might ask you to visit a website, send information via text or email, or speak with them on the phone to get the benefit,” says the Better Business Bureau. “The scammer will ask you to verify your identity by sharing personal details, such as your full name, address, or Social Security number. They may even ask for your bank account information, claiming that the representative will deposit the extra money directly into your account.”
The agency’s “COLA is automatic,” however, it claims. “You don’t need to do anything to receive the increase in benefits. If someone tells you otherwise, you’re likely dealing with a scammer.”
