Hedge fund manager CapitalistPig provides insights into the economic situation on “Kennedy”.
Rising prices are straining household budgets across the country, but the hottest inflation in four decades has been particularly tough on older Americans.
That’s because many of the country’s 56 million residents age 65 and older rely on a fixed income and limited savings — and must maintain their same level of spending power to meet monthly expenses over an extended period, according to Mary Johnson, a Social Scientist Security Analyst for the Senior Citizens League.
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Half of older adults living alone did not have enough money to meet basic needs before the pandemic began, according to the Elder Index, a cost-of-living measure compiled by the University of Massachusetts Gerontology Institute in Boston. The rapid increase in inflation puts an additional burden on these people.
The Social Security Office in Burbank, Calif., Nov. 5, 2020. (Valerie Macon/AFP via Getty Images/Getty Images)
Prices rose 8.5% in March from a year earlier, the Labor Department said last week, the fastest pace since December 1981. That rise extends to key staples whose prices have skyrocketed over the past year, such as groceries ( 8.8%), petrol (48%), electricity (13.5%) and rent (5.1%).
“If [older people] If you have retirement savings, inflation can dramatically lower the balance in your savings account,” Johnson told FOX Business.
There are two reasons that higher consumer prices are eroding the nest egg of older Americans. First, retirees are having to withdraw more to cover rising costs. Additionally, individuals with any type of fixed income investment, such as bonds or CDs, tend to earn lower returns because higher inflation is usually associated with higher interest rates.
“These are supposed to be ‘relatively safer investments,'” Johnson said. “But the real danger is that inflation can really eat away at those returns from these types of investments. The problem with a low interest rate environment and the problem with the inflationary environment is that you have to get more out of them. It’s kind of a loser.”
There are about 12% of older adults who live solely on Social Security, which pays an average of $1,657 per month, a 5.9% increase year-over-year. But rising inflation has already eaten up the entire increase, according to calculations by the Senior Citizens League.
People shop for groceries at a supermarket in Glendale, California on January 12, 2022. (Robyn Beck/AFP via Getty Images) / Getty Images)
At the end of April, the total shortfall for an average benefit was $162.60.
About 9.5% of people over 65 live below the federal poverty line, compared to 8.8% of younger adults, according to a Census Bureau measurement. A single person is considered poor in the United States if they earn less than $12,500 per year.
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A recent study by North America’s Allianz Life Insurance Company showed that only 40% of retirees believe their income is keeping pace with inflation. About half of those surveyed said they had a plan in place to counteract the rising cost of living.
“Regardless of whether they’re retired or still working, all Americans are being challenged by inflation and need to develop strategies to ensure their income keeps pace with rising costs,” said Kelly LaVigne, vice president of consumer insights at Allianz Life. “While changes in spending habits can be helpful in the short-term, it’s important that people take measured steps, such as