Because of relatively high inflation, older Americans should hold off on retiring if they can, a policy expert warned this week.
After an 8.7 percent Social Security cost of living adjustment (COLA) was implemented starting this year, some have said that it may not be enough to combat the effects of inflation.
“For one in four, it is more than 90 percent of their income in retirement,” Ramsey Alwin, the president of the National Council on Aging, told CBS News this week. People who are thinking about retiring soon should rethink their plans and work longer if they can, Alwin said.
“Consider delaying Social Security,” Alwin said. The reason is that every year a person delays retirement, the amount they can receive increases by 8 percent until age 70.
About 50 percent of Americans do not have access to retirement benefits via their work, according to AARP. There are reports of people in that situation retiring to another state where they think their money will go further.
Consumer prices for all items increased some 6.5 percent from December 2021 to December 2022, said the Bureau of Labor Statistics in its latest update on the consumer price index that is used to measure inflation. Year-over-year, “food prices increased 10.4 percent, reflecting an 11.8-percent increase in prices for food at home and an 8.3-percent increase in prices for food away from home,” said the federal agency.
That’s down from 7.1 percent in November and down from its 9.1 percent peak in June 2022. It comes as the Federal Reserve has consistently raised interest rates, with the central bank officials saying Wednesday that rates again need to rise.
The 8.7-percent increase in the COLA was the highest in about 40 years. The Social Security Administration notes that the COLA, implemented yearly, is directly tied with the consumer price index.
“Anytime they go through a loss of buying power, that means they are exhausting other retirement resources, like savings, or may be putting more on credit cards, or they might turn to safety net programs,” Mary Johnson, a Social Security and Medicare policy analyst with the Senior Citizens League, said in interviews last year, coming after the COLA was announced for 2023.
She added: “We have just been through a period where retirees are trying to cope and manage, and they have never been through anything like this before.”
A top economist, Mohamed El-Erian, warned in a recent op-ed that there is a 75 percent chance of inflation either remaining abnormally high, or rebounding and surging again later this year.
“This would force the Fed to choose between crushing the economy to get inflation down to its 2 percent 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 percent 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 percent.”
Because of the COLA for Social Security recipients, scammers are on the prowl, another organization recently warned. Those fraudsters may purport to be a Social Security Administration representative and say one has to apply to get their COLA increase.
“They might ask you to visit a website, send information via text or email, or speak with them on the phone to get the benefit,” says the Better Business Bureau. “The scammer will ask you to verify your identity by sharing personal details, such as your full name, address, or Social Security number. They may even ask for your bank account information, claiming that the representative will deposit the extra money directly into your account.”
But, the agency’s “COLA is automatic,” it says. “You don’t need to do anything to receive the increase in benefits. If someone tells you otherwise, you’re likely dealing with a scammer.”