Don’t be fooled by ‘cooling’ inflation.
The pace of inflation has slowed but prices remain high. The next time someone tells you inflation’s coming down? Ask, from what?! Sure, inflation has tapered since its 9.1% peak in June 2022, but Americans are still grappling with significantly higher prices of goods and services. Even with modest pay hikes, workers are finding it tough to keep up with inflation’s pace. It’s no wonder—overall inflation stands 13% higher than in April 2021. Retirees relying on fixed incomes are feeling the pinch, left with little choice but to cut back on essentials or seek extra income sources. Consider this: an average single retired worker getting $1,847 monthly will only see a $59 bump in 2024, not factoring in the $9.80 increase in Medicare Part B premiums according to the Social Security Administration. This is prompting older homeowners to ponder how long their savings can weather inflation’s impact. Reverse mortgage professionals would be remiss not to address the real-life consequences of soaring prices with potential borrowers. Eroding the value of the dollar Recent reports, like Bloomberg’s, indicate it now takes $119.27 to buy what cost much less in early 2020—a 19% hike in daily expenses. CNBC’s analysis of Labor Statistics data from April echoes this trend, highlighting how everyday items are significantly pricier compared to just two years ago. It’s not just the year-over-year inflation pace; it’s the current cost that truly matters. Despite expectations of some prices like homes and vehicles cooling off, most goods and services are unlikely to revert to pre-pandemic rates. In fact, most will become the new benchmark. Though inflation’s pace has slowed, its impact on wallets remains substantial. Between April 2021 and 2023, overall prices soared by 13%. The prices tell the story The grocery store bill tells a compelling story—food costs have surged by 25% since January 2020.Housing expenses have shot up due to surging home prices and mortgage rates. Average monthly mortgages have spiked by 40-60%, and rent for single or multi-family units surged by 28% since 2020, according to Zillow’s Rent Index. Utilities, too, have become more expensive. Residential electricity bills in California surged by a staggering 51% from August 2019 to August 2023. Stopping by your local fast food restaurant has become much more expensive—fast food prices have shot up significantly. Burgers cost 23% more, pizzas 17% more, and chicken dishes take 32% more from your wallet. While many working Americans live paycheck to paycheck, seniors understand the value of saving. But inflation is chipping away at their nest eggs, a concerning trend as savings rates mirror the lows before the 2008 Financial Crisis. Conclusion In conclusion, discussing inflation is crucial for potential reverse mortgage borrowers. It’s the undeniable elephant in the room that demands attention. by Shannon Hicks November 28, 2023
5 Tips on How to Make Your Money Last During Retirement
With 10,000 individuals in the United States reaching the age of 65 daily and entering retirement, the prospect of overseeing our finances for a prolonged period can seem overwhelming. The retirement phase, often spanning several decades, requires meticulous financial planning and strategy. The unpredictability of life expectancy and unforeseen expenses make financial planning during retirement particularly crucial. In this post, we’ll go over five effective strategies to help retirees ensure their savings last through their retirement years, promoting a serene and financially secure lifestyle. Exploring Home Equity Solutions like Reverse Mortgages One of the most significant assets many retirees have is their home. Tapping into this asset through a reverse mortgage can provide a steady stream of income, while still allowing retirees to live in their home. Homeowners 62 years and older can utilize a reverse mortgage, a loan type that converts a portion of their home equity into accessible cash. This option is especially advantageous for those with significant home equity but limited liquid assets. Should this appear to be the right choice for you, the initial step involves selecting a trustworthy lender and applying for the loan. For instance, you can apply for a reverse mortgage through Home for Life Reverse Mortgage, Inc. to work with a team of experts ready to guide you through the process. They can demystify the terms and conditions, making them easily comprehensible. Nonetheless, it’s important to remember that a reverse mortgage, while offering financial respite, also entails accruing a debt that must be repaid in specific situations, such as when the homeowner relocates or passes away. Therefore, it’s crucial for retirees to thoroughly understand the terms and consult with financial advisors to determine if this option aligns with their overall retirement plan. Creating a Budget Tailored to Retirement Budgeting during retirement is crucial. Unlike the pre-retirement phase where income is generally predictable and increasing, retirement income is usually fixed and requires careful management. Adjusting spending habits to align with this new income reality is essential. Retirees should prioritize essential expenses, such as healthcare, housing, and food, while seeking ways to reduce discretionary spending. Additionally, utilizing tools and resources for expense tracking can provide a clear overview of spending habits, facilitating the identification of areas where costs can be reduced. This proactive approach to budgeting ensures that retirees can enjoy their retirement without the constant worry of financial strain. Investing Wisely for Long-Term Growth Maintaining an investment portfolio during retirement is another key strategy for making money last. The right investments can provide a balance of income and growth, helping to combat inflation and preserve capital. However, the approach to investing during retirement should be different from the more aggressive strategies employed during the earning years. For sustained financial health during retirement, it’s advisable to gravitate towards lower-risk investments. However, maintaining a certain level of involvement in growth-driven assets is equally critical. Seeking guidance from a financial advisor can offer personalized recommendations, considering factors like risk tolerance, financial objectives, and the retiree’s unique circumstances. Reducing Unnecessary Expenses Retirees can also extend the longevity of their retirement funds by minimizing unnecessary expenses. This doesn’t necessarily mean living frugally, but rather being mindful about spending. For instance, downsizing to a smaller home can reduce maintenance costs and property taxes, while taking advantage of senior discounts and negotiating better rates on utilities and services can lead to significant savings. Adopting a minimalist lifestyle, where one focuses on the essentials and finds joy in simplicity, can also contribute to financial sustainability. By reducing the urge to spend on non-essentials, retirees can ensure that their funds are reserved for truly important and fulfilling experiences. Incorporating sustainable sources like recycling and reusing items can also reduce costs. Additionally, regular financial reviews to identify and eliminate unnecessary subscriptions or memberships can further enhance savings. Exploring Additional Income Streams Finally, considering additional income streams can be a game-changer. Part-time work, freelancing, or turning a hobby into a small business are all viable options for retirees. Not only do these avenues provide financial benefits, but they also offer mental and social stimulation, keeping retirees engaged and active. Retirees often possess a wealth of knowledge and experience that can be monetized. Whether it’s consulting, tutoring, or crafting, there are numerous ways to turn skills and passions into a source of income. This approach not only bolsters financial resources but also adds a sense of purpose and fulfillment to the retirement years. Final Thoughts Retirement should be a time of relaxation and enjoyment, not financial stress. By considering options like reverse mortgages, creating a retirement-tailored budget, investing wisely, cutting unnecessary expenses, and exploring additional income streams, retirees can make their money last. With these strategies in place, the golden years can truly be a time of comfort, security, and happiness. By The West News November 27, 2023