Here are 3 ways retirees can cope with higher prices amid rising inflation
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Americans spend hundreds of dollarsInflation causes more to be added each month.
This could also mean stretching an income that is already low for seniors.
Prices for consumers jumped 8.5%According to the, March is a drop in sales from one year ago. U.S. Department of Labor. This includes food which has increased 1% from the previous month, 8.8% from a one-year ago and gasoline which rose 18.3% and 48% respectively from March last year.
The past year saw a 5% increase in shelter prices.
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According to a certified financial planner, “The most challenging thing about this is the fact that we have to deal with inflation, low interest rates, and stock market volatility.” Marguerita ChengBlue Ocean Global Wealth, Gaithersburg, Maryland, is headed by.
She said, “These are three interrelated challenges.”
However, retirees might not suffer as much as the rest of the population in certain areas. Personal spending has changed in retirement. reduces the impactAccording to J.P. Morgan’s 2022 guide to retirement, there are some rising expenses.
“[Retirees]They have greater flexibility, in that they can decide not to travel this year if the price of fuel or airfare goes up,” stated CFP Michael Finke from The American College of Financial Services.
He said, “Business travellers don’t have the same flexibility.”
Inflation is taken into account when Social Security adjusts for. The seniors could get up to a staggering $600 next year. 8.9% cost-of-living adjustmentThe latest estimates from The Senior Citizens League, an independent senior group, show that it was 5.9%. In January 2022, there was a 5.9% bump. This is the largest increase in over 40 years.
Here are some tips for retirees to navigate inflation.
1. Social Security benefits are not available until you wait
Finke stated that the best way for seniors to prevent inflation from happening is to delay applying for Social Security. This will in effect, purchase more Social Security income.
When you retire at full retirement age you can increase your benefits by up to 8 percent for every year. wait to retireYou may live to be 70.
Finke explained that “if they wait until they are 68 or 69 it’s a tremendous improvement in their inflation-protected Income they can get.”
2. Review your budget
Cheng from the Advisory Board advises that you should account for rising prices in your budget CNBC Financial Advisor Council. This will allow you to see exactly what your spending is and which areas need to be cut.
Reduce unnecessary driving or put off vacations to reduce gas consumption.
This could mean shopping for food less often and buying more chicken. Or, going to a farmer’s market rather than the grocery store. Comparison shopping and coupons can help you to save money.
3. Keep your portfolio balanced
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Cheng stated that it is important to have a mix of stocks, bonds, cash and other assets.
She explained that having cash on hand can help you keep your investments afloat. You don’t need to sell any assets in order to have money. Cash is an ineffective way to fight inflation, as the money’s purchasing power decreases with rising inflation.
Cheng suggested that dividend-paying stocks and growth stocks are good options to help you focus on your longevity in order to ensure financial independence when you retire.
She explained that while these assets are subject to short-term fluctuations, they have been designed to provide protection from inflation over the long term and diversification for retirees.
Cheng suggests that you focus more on high-dividend stocks than rising-dividend stock when it comes to dividends. High payouts might need to be cut later while rising dividend stocks have a track record of increasing. You should look for funds that have a variety of familiar names.
You can also have different types of bonds. Although considered safer than stocks, bonds can be more volatile because of the possibility that interest rates will rise. Cheng said. It is the Federal ReserveThe Bank of America, which increased interest rates last month is anticipating six more hikesThis is the year.
Also, retirees might be interested in Treasury inflation-protected securitiesThey are backed and issued by the U.S government just like traditional Treasury bonds. These bonds come with inflation protection. There are also exchange-traded funds that can be used to invest in TIPS.
I bondsThey can also be used as a way to hedge against inflation. An investor can purchase up to $10,000 annually but cannot access funds for twelve months.
Inflation is a risk that must be considered at all costs.
Cheng stated that inflation is sneaky; it can kind of sneak up on you.” You just need to make sure it doesn’t becomes a problem.
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