Gold as an investment

8 Money Tips for Seniors Suffering from Inflation

Sep 24, 2022

Inflation

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.

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Why Are Seniors More Affected by Inflation?

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There are several reasons why inflation is harder on seniors than 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 $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 benefit 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 in price.

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.

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Tip No. 1: Be Smart about When to Claim Social Security

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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 ways.

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Tip No. 2: Get Creative with Your Spending

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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 home.

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 (ot even want them).

Buying name brands: Try to switch to generic brands.  It will save you a lot of money.

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Tip No. 3: Enjoy Life, Because It Could Be Long!

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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!

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Tip No. 4: Don’t Go Bold with Your Portfolio

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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, 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.

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Tip No. 5 Tip: Shop Smart

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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 filet mignon. 

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Tip No. 6 Tip: Mobilize the Kids

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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.

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Tip No. 7: Rent a Room

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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.

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Tip No. 8: Go Potluck

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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.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Neale Godfrey, Financial Literacy Expert

President CEO, Children's Financial Network Inc.

Neale Godfrey is a New York Times #1 best-selling author of 27 books, which empower families (and their kids and grandkids) to take charge of their financial lives. Godfrey started her journey with The Chase Manhattan Bank, joining as one of the first female executives, and later became president of The First Women's Bank and founder of The First Children's Bank. Neale pioneered the topic of "kids and money," which took off after her 13 appearances on "The Oprah Winfrey Show." www.nealegodfrey.com


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