Nathan Abse interviews TSCL's Mary Johnson, who offers insights on the particular pocketbook issues hurting retirees the most—and prospects for improvement in the near-future.
The Senior Citizens League, a nonprofit advocacy and research group for retirees, continues to track inflation and other economic concerns of older Americans. Throughout 2022, however, inflation has been the biggest concern—imperiling the always-vulnerable financial health of people living on fixed incomes. TSCL lobbies Congress and presses for reforms to better protect retirees from inflation—especially with respect to enacting fairer COLAs for Social Security recipients. This week Nathan Abse spoke with Mary Johnson, TSCL’s Social Security and COLA expert, on specific impacts of inflation for retirees, including diminished purchasing power (despite COLAs) of Social Security and pensions, a drop in values of portfolios including TSP, home real estate values, and other investments. Johnson sees some hope in slight improvements in the inflation rate—and government efforts that may be helping improve and buffer the effects of price rises. Beyond analysis, Johnson also offers several ways to save money in these tough times.
Q&A with Mary Johnson
Federal retirees, for the most part, rely on retirement funds drawn from FERS, TSP accounts, Social Security as well as real property and personal savings. Inflation has run high much of the last year—but recently we have some slight signs of improvement, right?
Johnson: Well, the problem of inflation has eased, or is easing, a little bit—especially on some items. But of course it's still at least two times higher—even more—than what it has usually been for many years. Not good.
What is your take on just how bad things have been, for the average person—or retired fed—for the year 2022?
Johnson: Based on inflation, as measured from the beginning of the year through October, Social Security benefits would need to be 34% higher than what seniors actually have received. Let me put that another way: On average, year to date, Social Security lagged inflation by 48%. Very tough. (Of course the COLA will help, some, in the next year.)
Where does that leave the average retiree, then—as an example, with respect to their Social Security payments alone?
Johnson: The average retiree is about $489.50 behind for the year—that’s when we calculate how much buying power their Social Security payments have lost [in current dollars] versus inflation.
OK, so that’s the dollars and cents loss on Social Security alone—but could you describe how you and your contacts are seeing their situation, in words?
Johnson: Well, personally and with people I hear from, it's like the whole world is kind of going to hell. Maybe more modestly, I’d say it’s been very challenging for seniors. But you have older people—like some in my family—who are lower income, and really have had to become very dependent on food pantries and family help during this time. Health care has been an especially hard issue for many. Even with additional outside help like I described, some are of course not getting the medical care they need at present, because they’re postponing it.
There certainly are reports that health care delaying and skimping are tactics used by many—any others you think must be addressed?
Johnson: Yes, many. On healthcare, many are not getting the prescriptions they need, because they either can't afford them or the portion they have to pay—or sadly even they can’t afford to pick them up at the pharmacy, can't even afford the gas! There are these and other added and very real challenges for lower income people. Some other people have the necessary funds, for now, but many of those with limited savings are burning through their savings much, much faster than anticipated. All of this is driving up anxiety levels. It’s also leaving more people applying for safety net programs than in the past—and there is a clear increase in the number of people who are dependent on those programs.
Much of that from just over a year of higher inflation—do you see other economic storm clouds on the horizon for retirees?
Johnson: Well, there is discussion among some experts reminding that bringing down inflation in the ways that this is usually done—this can come with its own problems, right? What do I mean here? I mean, you can end up in a more serious recession. And it’s even possible that at some point down the road we could be worrying about deflation! In my read, in my research I haven’t gone deep on that or evaluated the risk yet.
You mention “deflation”—being frivolous, that’s a “problem” that sounds welcome for now! Seriously there is a slowdown already in real estate markets, which can hit older people, with respect to their home’s sale price or borrowing ability (loans and reverse mortgages). Not helpful if downsizing or for estate planning—so, real estate lost value is already a problem …
Johnson: Yes, with the current economy, all that is a problem—and more. As you noted, the real estate piece gets very problematic when seniors have to move, as many do. For instance to head for smaller housing, or some kind of more cost-efficient housing, or even assisted living. And it’s a pressing problem now when they or their family suddenly are trying to sell the home. If there’s a crisis, and a family member needs to move—look, when it’s assisted living or a nursing home and you have little time to sell the home. There have long been problems with this situation! But with mortgage rates quite high (even if down a bit) as they are now, it’s tough. And so, this is part of the inflation puzzle—that it really affects real estate, which is a lot of people’s savings. And the effect can be part of leading to deflation, potentially another pretty unfamiliar problem.
So—we’ve got inflation, lowered value of Social Security and other pension payments (such as FERS) that don’t keep up but rather chase inflation, diving stocks and other savings portfolio values—and yet if you planned to retire or are, big problems! How do you overcome all this?
Johnson: Having written about retirement most of my life, if you’re me you're resigned to the fact that there is no perfect or “one” solution. But there are many things you can do to help yourself. The obvious ones start with being careful with your money in the first place. But as you approach retirement, you can still delay distributions, slow things down. Now, over this past year, I had a sinking feeling in my stomach. It’s had me rethinking: “Well, I hope I can continue working. I still want to at this phase of my life.” But, realistically, it’s an even bigger problem for people who are very close to retirement or really must retire, and—boom—suddenly they’ve got significantly less money than they’d hoped for.
So—again, any more realistic solutions—or, rather, ways to improve things?
Johnson: There are no magic bullets here. What I have a good grasp on, because of my way and my work, is budgeting, right? But I am well aware many people don't have that skill. All I can do here on this front is advise people to try to find ways to get into it. Don’t be afraid of budgeting. It really can be learned! Then, once you start to grasp it, it’s important to budget not just for the day, or the week, or the month. You need to be budgeting for a year to five years ahead. I know that can sound really hard, but you need to start—start to make a plan and start to save some money and put it aside. Of course, if you are already retired it’s another matter. Putting money aside is hard when most of your saving already has been done. So, you just have to make tough decisions on how to reduce and downsize—start by zeroing in on what you can live without and still be happy. Then, go ahead and act on that—do it. What you can live without happily, go ahead and cut that. And then, in the future, maybe you can splurge on some of those things a bit—but not right now. Look, budgeting is one of the first things you have to do right now, and it’s the thing to do long term.
Budgeting, or budgeting more strictly, is a bitter pill for those who don’t do that easily—but of course it’s needed. Anything else?
Johnson: I know. It is hard. And for those who would use a shoebox kind of filing system, I would instead advise at least try to keep track of things using other means. It will be less frustrating. Use an Excel sheet, if you’re handy with those—many who use computers are. And don’t torture yourself taking down every single little budget item, right? Try at least outlining and budgeting the big stuff. Break items down—whether on a computer file or a yellow pad with a pencil—your mortgage, your home expenses, your other payments. Next, I advise that you use a consumer-friendly credit card—I use one for virtually everything It can help you right away keep track of groceries, trips to the doctor, prescription orders, even home heating expenditures. I put it all of mine on the one card—makes it easy to keep track of and it's a rewards card too. You actually get a little bit back each month—I use that to buy gift cards for my family. These are relatively simple steps. But they help a lot.
Sounds very practical and less painful for budgeting—any other suggestions that you and those seniors you serve are happy with?
Johnson: Another one I see other seniors do—but not enough—is to really dig and find ways that are already out there to cut some costs, but in ways that don’t interfere with your purchases. This is very important with, for example, medicines. I’ve had to practice on this. The first time I tried this was because I was not sure that the medication I was prescribed was not the one I wanted to use. In short, I was prescribed a very expensive asthma drug and it turned out that, in my situation, it was the only one my Part D plan covered! It only covered the most expensive brand pharmaceutical drugs—and not some perfectly good generic similar medicine. To my mind, this is criminal. In any case, I was able to find alternative ways to get what I needed at a price I could manage—by way of a discount card (here it was “Good Rx,” and there are others). In the end instead of paying $475 for my part of a 90 day supply, I paid about $175 with the coupon card. Thank goodness!
Cutting back on less-needed items, economizing, coupons—but were you more optimistic about inflation at mid-year than you are now?
Johnson: What I can say about inflation right now is that I think we have some good signs that it is coming down. Or beginning to. For a few months, now. And that’s good. It’s also good that it is happening gradually. You do not want inflation to come crashing down too fast—it can indicate or lead to an economy with still more serious problems.
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