Tips on coping with inflation


By David Wilkening, Contributing Writer

 The grocery store is one place where the effects of inflation have been felt greatly. Photo/Submitted
The grocery store is one place where the effects of inflation have been felt greatly.

REGION – Costs are higher when you pump gas, go to the grocery store, and pay for many other necessities. It all adds up to one number: The worst inflation in 40 years.


Older Americans hit harder

“Inflation is tough for everyone. It’s especially tough for older Americans living on fixed incomes,” said Michael W. Klein, an economist and professor at Tufts University. A report last year from the National Institute on Retirement Security found that up to 40 percent of older Americans rely solely on Social Security for income in retirement.

Social Security does include yearly cost of living adjustments. This year’s was the largest in decades at 5.9 percent. But it has never kept up with inflation rates. Major reasons include a failure to keep up with rising medical costs, which often are the top expenditure for retirees.

There’s general agreement on that. But “In short,” concluded a recent study on the subject published last year. ”Social Security does not fully insulate older households from inflation’s erosive impact.” The study from the Center for Retirement Research at Boston College, was done by Alicia H. Munnell and Patrick Hubbard. 

So what can you do if that’s your own situation? Are you relying totally on your Social Security check each month without any other source of income? There are answers. Here are some suggestions.


Look for Social Security’s untapped resources

Most people routinely associate Social Security with traditional retirement payments. But one expert maintains it has a lot of often untapped additional resources. Economics professor at Boston University and author Laurence Kotlikoff has written books that say it is the “biggest source of retirement funds that are overlooked.”

He said there are 13 different kinds of benefits you can receive, which include disability benefits, spousal benefits, and others. But often people simply don’t apply for them, so they go untouched. A good example is spousal benefits. They can boost monthly benefits by several hundred dollars. Spousal benefits allow individuals to receive them based on a spouse’s earnings record (if their earnings were higher). The result is that recipients can have both their own and spousal benefits.

Lifestyle changes, while sometimes difficult, can help in reducing your expenses, says Jeffrey Tomaneng, wealth advisor at Asset Management Resources in Hyannis. Photo/Submitted
Lifestyle changes, while sometimes difficult, can help in reducing your expenses, says Jeffrey Tomaneng, wealth advisor at Asset Management Resources in Hyannis.

What are some more options? Jeffrey Tomaneng, wealth advisor at Asset Management Resources in Hyannis, is among those who see changes of lifestyle as not always pleasant. “Sometimes, these are difficult decisions,” he admitted.


Other ways to save money

Tomaneng came across some of those decisions in helping an aunt who retired in the 1960s and found her income could no longer meet rising expenses. She considered sharing her home to cut expenses, which is a common suggestion. “It’s not for everyone because you’re giving up your privacy,“ he said. Instead, she moved into a smaller home in a lower-priced area. But Tomaneng admitted the idea of sharing a home that has perhaps gotten too large might not be acceptable to many people.

Another consideration might be taxes. Financially strapped retirees might consider moving out of a state with income taxes to another of the nine states like Florida that do not have a state income tax.

Still another consideration might be to get a part-time job. The U.S labor shortage is obvious and there has perhaps never been a better time for healthy seniors to find temporary jobs.

Naturally enough, the subject of help from financial planners arises. And Mike Lynch, Managing Director of Applied Insights at Hartford Funds, has a practical approach to budgeting. He suggests planners can help in determining what is “nice to have” and what is “necessary.” A good example: someone who regularly visits coffee shops. “Making coffee at home could save some daily or weekly dollars,” he said. “There is no better time than today to start the budget process and see what can be scaled back or eliminated,” he noted.

Rising prices for groceries is a common complaint. But not all food items are getting expensive at the same rate. So be selective at the grocery store. Rising prices are particularly impacting animal-based products. Shifting to plant-based meals can cut grocery costs (and add to healthier food habits). Research can help in picking food items that are more reasonably priced.

For those not yet taking Social Security but approaching retirement age, Klein is among economists who urge putting it off as long as possible to get the maximum allowed benefits. Planners and others such as economists also suggest that those who still have discretionary incomes invest in diverse portfolios. These may include stocks, bonds, even gold or commercial/residential real estate properties.

“People can try to have a more aggressive but riskier portfolio earlier on in life but as you approach retirement, you would not want the value of your investment to fluctuate a lot,” said Klein, a published author who served as an economist during the Obama administration.


And if inflation slows?

The most common predictions about the current rate of inflation are that it will continue. But what if, oddly enough, inflation does slow? He does not expect it but Klein says that would be a positive development. “But it is also worth noting that inflation represents price changes for all goods and services weighted by what the general population spends, but seniors might have very different spending patterns that the weights used in calculating inflation,” he said.

In other words, no easy solution there, either.