A policy expert cautioned older Americans considering retirement to delay doing so, if they can, because of high inflation.
“For one in four, it is more than 90% of their income in retirement,” National Council on Aging President Ramsey Alwin told CBS News this week.
People should rethink their plans and work longer if they can, Alwin said. The recent 8.7 percent increase to Social Security has helped but is still short of price increases retirees face for daily needs.
The AARP stated nearly half of Americans do not get retirement benefits through work, according to the CBS report. Neither did a woman featured in the report who retired to Montana where she thought her money would go further.
“Moving to Montana was basically my dream retirement,” the woman said. “I figured the golden years were going to be wonderful.”
Even though that state’s cost of living is lower than coastal states, increases in food, energy and housing basically ate up the 8.7 percent bump to Social Security.
“Social Security is all they have,” Alwin said. “For one in four, it is more than 90% of their income in retirement.”
That is why the National Council on Aging’s president advises against early retirement in the current inflationary environment.
“Consider delaying Social Security,” Alwin said. Every year a person delays retirement, the monthly benefit they are eligible to receive increases by 8% until age 70. Some people have no choice because it is the only source of income they can get. Others reason their poor health may mean they never collect Social Security.
For healthy people who expect to live a long life, a delayed retirement can add significantly to their monthly benefit check.
Inflation has slowed somewhat during the last six months but has not gone away. Consumer prices averaged 6.5% higher for the 12 months ending December 2022, according to data supplied by the Bureau of Labor Statistics. Food prices are 10.4% higher than the previous year and many consumers are suffering from large increases in energy prices.
BLS data reveals that fuel oil prices jumped 41.5%; electricity prices rose 14.3% and natural gas piped to homes was 19.3% more expensive.
The 9.1% inflation reported in June 2022 has decreased incrementally, but not before the Social Security Administration announced its 8.7% cost-of-living-allowance increase, in October.
Economist Mohamed El-Erian warned in a recent Bloomberg broadcast that chances of inflation either remaining abnormally high or rebounding and surging again later this year is around 75%.
“This would force the Fed to choose between crushing the economy to get inflation down to its 2% 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% 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%.”
Continuing to work while inflation is high is the course recommended by the policy experts for those who have the ability to put retirement off for a few months or years.
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