How Does Inflation Affect Retirement?

Retirees have unwillingly been on a financial rollercoaster of fast-changing economic conditions over the past few years.   A robust economy was interrupted by a global pandemic, which triggered a short-lived global recession in the face of unprecedented shutdowns.  Then, there was an astonishing recovery and a booming stock market as the economy bounced back once the pandemic was brought under control.

But that has all changed in 2022, as crippled supply chains, tight labor markets, and free-flowing consumer spending has led to severe inflation.

According to a recent CNBC article, "[t]he consumer price index, a broad measure of everyday goods and services related to the cost of living, soared 9.1% from a year ago, above the 8.8% Dow Jones estimate. That marked the fastest pace for inflation going back to November 1981.”

Price instability is taking its toll on Americans’ wallets, as well as their psyches. The Monmouth University Polling Institute found that 42% of Americans are struggling to remain where they are financially, with nearly half of respondents citing inflation or gas prices as their biggest worry, in a July 2022 survey.

“The sense of optimism coming out of the pandemic has all but deflated as a looming recession has Americans taking stock of their financial situation and wondering how they’ll be faring in just a few months,” reported Fortune magazine on July 6th.

Inflation is particularly tough on seniors. It not only triggers higher prices on everyday items that must be purchased by many retirees who are living on fixed incomes, but it has also ravaged even the conservative investment portfolios typically held by seniors as stocks and bonds have fallen at the same time this year.

“Rising prices are squeezing household budgets around the country and putting additional strain on its 56 million residents age 65 and up, many of whom rely on fixed incomes and limited savings to cover monthly costs for prolonged and unpredictable periods,” said The Washington Post.

Personal finance experts advise seniors to take concrete steps as a good way to feel less victimized by changing economic circumstances in retirement. For example, seniors should consider:

1. Reviewing Health Coverage 

Is the proper amount of health insurance in place to eliminate major financial risks in the future?

2. Revisiting Tax Planning

Depending on where a retiree lives, can more retirement income be protected from state and federal taxation? 

3. Eliminating Debt

Is it prudent to consider liquidity options by selling assets to pay off any accumulated debt?

4. Updating Estate Plans

Does a professionally drafted estate plan — even if it is very simple — include legally binding directions for how medical and financial affairs are handled while alive in addition to addressing the distribution of property when no longer living? 

Financial stress will be eased by addressing these four areas in a senior’s control. In addition, it is recommended by the same financial experts, to establish, if possible after eradicating unpaid bills, a “cash floor,” which is a pool of liquid money set aside that can be accessed at any time during retirement as needed.

Against this backdrop, many seniors are discovering a proven strategy whereby they may be able to reduce their annual expenses and raise cash flow simultaneously.

If a retiree owns a life insurance policy that is no longer needed, wanted or affordable — or perhaps is no longer serving its original purpose — he or she needs to know that it can be sold just like any other personal property through a safe and highly regulated transaction called a life settlement.

The funds obtained can be used in any manner whatsoever to help fight the effects of inflation, including paying for retirement expenses and offsetting expensive health care bills.  Or they could be used for gifts to family members or charities, allowing seniors to experience the joy of giving before passing away.

A  life settlement enables qualified policy owners to sell their life insurance coverage to a licensed financial entity that purchases policies in the secondary market for life insurance, in exchange for a lump sum cash payment.  The life settlement industry has paid billions of dollars to consumers. According to one U.S. Government Accountability Office study, life insurance policy owners received four to eight times more money than the cash surrender values offered by life insurance carriers.  The funds obtained can be used in any manner whatsoever to help fight off inflation and pay for retirement expenses and offset expensive health care bills; or they could be used for gifts to family members or charities, allowing seniors to experience the joy of giving before passing away.

For more information on life settlements or to receive a free life insurance policy appraisal, then please visit www.welcomefunds.com or call 877.227.4484.