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Inflation and Retirees

Inflation presents significant financial challenges for retirees living on fixed incomes, as rising costs strain budgets. Although Social Security has a Cost of Living Adjustment (COLA) built in, Social Security was never meant to be your only source of income after retirement, but rather it was intended to supplement your other retirement income. This article will explore key areas most affected by inflation, such as food, energy, healthcare, and discretionary spending, and provide practical … [Read More...]

2025 Social Security COLA

With inflation trending down, the Federal Cost of Living Adjustment– (COLA) will be smaller in 2025 than in 2024. For 2024, the increase was 3.2% but beginning in January 2025 Social Security will get a smaller 2.5% increase. Although the most commonly quoted inflation statistic is the Consumer Price Index for All Urban Consumers (CPI-U) for some reason the government chooses to use the October print of the CPI-W (Consumer Price Index for Urban Wage Earners and Clerical Workers) instead.

October 2024 Inflation Up Slightly

October annual inflation was up slightly but the market has still responded euphorically with “risk-on” assets soaring and “risk-off” assets like gold falling.

Inflation Summary:
• Annual Inflation rose from 2.44% to 2.60%
• CPI Index rose from 315.301 to 315.664
• Monthly Inflation for September was 0.16% and October was actually slightly lower at 0.12% but monthly inflation for October 2023 was -0.04%
• Next release Dec 11th 2024

The BLS Commissioner reported:

“The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent on a seasonally adjusted basis in October, the same increase as in each of the previous 3 months, the U.S. Bureau of Labor Statistics reported today.
Over the last 12 months, the all items index increased 2.6 percent before seasonal adjustment. The index for shelter rose 0.4 percent in October, accounting for over half of the monthly all items increase. The food index also increased over the month, rising 0.2 percent as the food at home index increased 0.1 percent and the food away from home index rose 0.2 percent. The energy index was unchanged over the month, after declining 1.9 percent in September.”

Looking at table A below we can see that on an annual basis energy and commodities are pulling inflation down and both Energy Services and Other Services are pulling it up.

The biggest gainers on an annual basis were Food away from home, shelter, transportation and medical services.

Inflation-Proofing Your Family Budget

Monthly Ave Bitcoin Price non log Oct 24a

Protecting your savings during periods of high inflation is crucial to remaining financially stable in the long run. Wise investing and simple steps like opting for white-label groceries can minimize the impact of inflation on your family and help you maintain a high quality of life. Just be sure to work with a financial planner if you’re unsure of the best path forward, as they’ll be able to spot unnecessary expenses and identify investment strategies that work for your family.

September Inflation Falls

The U.S. Bureau of Labor Statistics released its September Inflation report on Wednesday October 10th showing Annual Inflation was down from 2.5% in August to 2.4% in September.

(But since we calculate it to two digits, it was actually 2.53% in August and 2.44% in September.) On a non-seasonally adjusted basis, monthly inflation in August was 0.08% and it increased to 0.16% in September but that was still lower than last September’s 0.25% so the annual inflation rate fell.

FED Interest Rates

The federal funds rate is the FED’s main benchmark interest rate that ripples through the U.S. financial system and indirectly influences how much consumers pay to borrow and how much they’re paid to save.

The FED funds rate filters out through the rest of the economy because it’s the interest rate that banks charge each other for overnight lending.

On Wednesday, September 18^th, the FED reduced interest rates for the first time in four years. Mr. Market has been anticipating this cut all year and it finally happened. Last month FED Chairman Powell hinted at a rate cut at this FOMC meeting and at the time most experts believed that the cut would only be 25 basis points or ¼%. But, once lower-than-expected August inflation numbers were released on September 11^th, the market began clamoring for a 50 basis point cut, or even a 75 basis point reduction. In addition, the market wanted further reductions in November and December as well. There has also been talk that the FED has waited too long to act (again) and so a recession is in the making.

Without looking at inflation-adjusted prices it is difficult to see where gasoline prices actually stand. Back in 1918 gasoline was $0.25 a gallon and by 1932 prices had fallen to 18 cents a gallon! But as we all know over the last 100 years the purchasing power of the dollar has fallen drastically so in order to get the true picture we can’t just say that the lowest price of gas was 18 cents per gallon, we need to adjust the price for inflation. When adjusting for inflation there are two prices… the first is called the “nominal price” and that is the actual price you would have paid for gas at the pump. The key price though is the inflation-adjusted price which calculates what the price would have been if we were spending current dollars on a specific date. In this case, we are basing our calculations on the value of a dollar in January 2020.

Inflation Adjusted Real Estate Prices- Lets take a look at the idea that housing prices always go up. Of course, each neighborhood is different, so some neighborhoods might be going down while a few miles away housing prices are skyrocketing but by looking at the nationwide average we can get a better picture of the overall trend. The St. Louis Federal Reserve publishes the following chart that shows the S&P/Case Shiller National Home Price Index and by adjusting those prices for inflation we can get a better picture of how real estate prices really act. Is a home a good investment or not?

Today’s Featured Post

Inflation and Retirees

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2025 Social Security COLA

October 2024 Inflation Up Slightly

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