Inflation in the U.S. is starting to show signs of cooling after reaching historic heights over the last year and a half. This is good news for almost every U.S. household, but especially for the more than 55 million Americans at retirement age or older.
Unlike many working-age adults, who are leveraging a tight labor market to secure higher wages that outpace inflation, retirees often rely on investment accounts like 401ks or IRAs and fixed income like pensions or Social Security. But stock market returns have fallen over the last year, and fixed income programs often do not adjust payments quickly enough to account for inflation.
The Social Security Administration recently announced that the program’s beneficiaries will receive an 8.7% cost of living adjustment in 2023. The increase in benefit payouts comes after a 5.9% cost of living adjustment in 2022, which was the highest since the 1980s. But despite these aggressive increases, critics have argued the adjustments are insufficient given the pace of inflation and the high number of retirees who rely entirely or almost entirely on Social Security.
Rising cost of living and reliance on fixed income threatens to push higher shares of elderly Americans into poverty. Essential categories like food and housing have seen the highest rates of inflation since 2021, which can quickly eat into household budgets. Elderly people are also more likely to face medical issues that could add to their expenses. As a result of these factors, 11.5% of Americans aged 75 and over have incomes below the U.S. poverty level, the second highest of any age cohort. And according to Census data, elderly Americans were the only age group to see an increase in the share living in poverty from 2020 to 2021.
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