This year has been an especially tough one for seniors on fixed
incomes. To stay on track, try these eight financial survival tips.
Why is this year different from all other years for seniors?
Inflation. The latest numbers show a whopping inflation rate that’s
the highest since 1982. This means that everything you buy will be
more expensive. You see this impact at the gas pump, the grocery
store, the doctor, and, frankly, all over. The issue is that you don’t
have a choice not to buy certain things.
It’s interesting, because, we sort of have a love-hate relationship
with our financial world. We love that the economy is back roaring at
a full-employment rate and that almost anyone can get a job if they
want one. We also love that wages are going up and that we are back
in the car and eating out and traveling. But at the same time, we hate
that this growth breeds inflation, resulting in costs for everything
rising. We also may support the Ukrainians in their war with Russia,
but we hate the costs to us.
Why Are Seniors More Affected by Inflation?
There are several reasons why inflation is harder on seniors than on
others. Let’s start with the fact that most seniors live on a fixed
income. Inflation is not an abstract idea … it’s real. The income
you get can come from many sources, including Social Security. It
should be noted that a cost-of-living-adjustment (COLA) is built into
Social Security. In fact, this year there was a 5.9% bump. This
translates into the average Social Security benefit in 2022 getting
boosted to $1,657 per month, up to $92. This sounds great, but the
annualized inflation rate is running at 8.6% over the past 12 months,
the Bureau of Labor Statistics reported on June 10. That more than
wipes out the Social Security benefits increase.
Seniors with conservative portfolios are also seeing a hit to their
savings and investments. It’s prudent to be invested conservatively
as you age because you shouldn’t be taking big risks. But these
conservative lower returns also mean that inflation will hit you
harder as you have less to spend on goods and services that are rising
But let’s face it: As seniors, you have “been there and done that.”
You’ve gotten through tough times before, and you can do it again.
To help you along, here are some tips to lessen the hit inflation is
taking from your income.
Tip No. 1: Be Smart about When to Claim Social Security
If you can, delay claiming Social Security. You may increase your
benefits by 8% for each year you wait to retire, up to age 70.
Claiming your Social Security at 62 could mean a 30% reduction of your
benefits. If your full retirement age is 66, you will get 100% of your
monthly benefit if you start claiming then. If you delay until you
are 70 you will get 132% of your monthly benefit. One way to help you
in your effort to delay claiming is obvious but bears mentioning: Work
longer. Working longer boosts your Social Security benefit in many
Tip No. 2: Get Creative with Your Spending
There are only two ways to really ease the burden: Earn more or spend
less. Earning more may not be an option, but you can always figure
out how to spend less.
It’s time to look at your budget. Go over your current spending, line
by line. Really decide if each item is a want or a need. You need to
know your expenses, and you really need to examine them. Obviously,
you are paying a fixed amount for rent or mortgage, for instance. But
you have lots of discretionary spending, as well. Things like:
Eating out at work: No matter where you are going, eating out will
cost more. Even if you are only spending, let’s say, $10 a day, five
days a week, that will be $2,600 a year. Figure out how much you are
spending and conversely, what it would cost to buy food and cook at
Coffee: You hear about taking your own coffee, and it may not seem
like a big deal. But you can easily spend $70 a month, which adds up
to $840 a year.
Subscriptions: Many subscriptions are on auto-pay. Look at these
subscriptions and see if you are using them (or even want them).
Buying name brands: Try to switch to generic brands. It will save you
a lot of money.
Tip No. 3: Enjoy Life, Because It Could Be Long!
Plan smart by not running out of money. Count on living longer than
you may have thought. In the U.S., the average life expectancy rate
for women is 81 years and for men is 77 years. You do not want to
outlive your money, so be conservative when you are planning by
matching your investments and spending to your life span. And plan to
live a long time!
Tip No. 4: Don’t Go Bold with Your Portfolio
Stay away from the sexy stock portfolio hoping to pick the best
winner. You should have a conservative portfolio that is going to
sustain your financial independence in retirement. Leave the sexy to
your younger kids.
Instead, consider dividend-paying stocks, and growth stocks, and make
sure that you have enough cash on hand if you need money. Throw some
bonds in the mix. Annuities can offer some inflation protection, but
it depends upon the type and when you bought them. Think of them as
retirement insurance. You pay the premium and at the end of the term,
you get a fixed monthly income back. I’m not a fan of investing in
gold, but it helps some people to sleep at night. It keeps me awake
because it is hard to liquidate.
Tip No. 5 Tip: Shop Smart
Form a group with neighbors to go together to the store (saving gas)
to buy in bulk (saving money). Make sure that you have a list of what
you need before you get there and items, like paper products, that are
easy to share.
Cook and freeze extra meals. Meat prices are high, so consider buying
cheaper cuts and making stews and chilis that are just as healthy as
Tip No. 6 Tip: Mobilize the Kids
Review all of your subscriptions. These can include hardcover
magazines and newspapers. The subscriptions for online services, such
as Amazon Prime, can also creep up. Your kids can review all of
these with you. They can also examine your phone and computer service
plans and figure out how they may be bundled or reduced, if not used.
Tip No. 7: Rent a Room
You could consider taking in a friend as a roommate to share expenses,
or even put your place up for rent on Airbnb if you are away for a
while. Or, you could rent out your home and move in with a friend for
a period of time, especially if you live in a desirable vacation
location. Your kids could be thrilled to have a babysitter for a while
if you rent your home out.
Tip No. 8: Go Potluck
Instead of going out with friends to expensive restaurants, host
potluck dinners where everyone brings a dish. It will save a lot of
money, and the real point is to get together with friends.
Belt-tightening can ease the effects of inflation and it does not have
to look like a punishment; it can look like a challenge. You can
design ways to beat inflation as a family and with your friends. Give
it a go.