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Inflation vs. Those Old Folks
Old 05-18-2009, 07:06 PM   #1
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Inflation vs. Those Old Folks

If you happen to know any old folks, you may want to pass this article on to them.

Quote:
Make no mistake: A dollar doesn't go as far as it used to. That's true for all Americans, but the loss of purchasing power is especially insidious for Americans aged 62 and older. This group lives between the proverbial rock and a hard place: Fixed incomes plus inflation that tends to run a bit faster than that for the general population.
Fortunately, there are some solutions to the problems faced by older Americans who feel squeezed by the ever-rising cost of living.

But first some background: Inflation for older Americans rose on average 3.3% over the 25 years from December 1982 to December 2007, according to the U.S. Labor Department's Bureau of Labor Statistics' experimental consumer price index (CPI-E), an index designed to track the cost of living for those aged 62 and older.

By contrast, inflation rose just 3% according to the CPI-U, the index that tracks the cost of living for all workers. To be sure, it might not seem like a lot, but over time, that difference can add up, especially if you're living on a fixed income. Consider: $1 in 1983 was worth just 44 cents in 2007 for those 62 and older, compared with 47 cents for all other Americans.
Inflation-Hits-Hard-When-You-Can-Least-Afford-It: Personal Finance News from Yahoo! Finance
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Old 05-18-2009, 07:29 PM   #2
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Yadda mean old folks - I distinctly remember 1966 - when I went from starving student to 'the big bucks' - $8000/year considered well above the ave. engr. salary - cause Boeing was desperate for engineers.

Time is gonna get me one way or another - I don't think I'll ever get too poor to die plus I heard this vicious rumor you can't take it with you.

heh heh heh - Soo should I spend more now before before time makes it($) fade in value and flavor? I had a little buy before the price goes up attitude in the 70's - but I got raises back then.
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Inflation vs. Old Folks
Old 05-18-2009, 08:37 PM   #3
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Inflation vs. Old Folks

Here in PA, low income seniors have something of a benefit with the PA Lottery, whose proceeds are earmarked for people 60 and over exclusively. Depending on income, one can get a property tax/rent rebate, pharmaceutical assistance(PACE/PACENET), home care after Medicare discharges, Farmers Market Vouchers, subsidized public transit on buses and in taxis, audit community college classes free of charge and qualify for subsidized housing. All of these things can help to offset rising prices for vulnerable seniors. The lottery also funds APPRISE which offers health insurance couselling, and programs which find employment in the private and public sector. Every little bit helps.
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Old 05-18-2009, 08:38 PM   #4
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I've always had a hard time understanding what a "fixed income" is. I hear retired people and their advocates talking about it but I can never really fully understand it. SS is far from fixed. A portfolio earning 7% is hardly fixed. My pension is non-cola so I guess its fixed but my mortgage is a fixed rate so they offset each other. So I'm still wondering what a "fixed income" really is.
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Old 05-18-2009, 09:37 PM   #5
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Originally Posted by Bikerdude View Post
So I'm still wondering what a "fixed income" really is.
Ooh, ooh, I know! You're describing my parents-in-law, who were born during the Depression.

First you take a lump-sum early-retirement package and put it in the 1990s stock market. Then you get traumatized by 2000-2002 and take what's left out of the stock market. Once it's in CDs & short-term Treasuries, you watch the APY wither away to 2-3%.

Then you leave it in CDs & Treasuries for the next six years, missing out on everything except rising interest rates (and inflation). Don't trust those I bonds or TIPS-- the b*****ds manipulate the CPI to exploit the taxpayers, and when deflation hits they'll be worthless. (The bonds, not necessarily the b*****ds.) When the credit markets lock up, you watch your 5-6% APYs wither away to 1-2%.

For extra bonus points you sell your home (in the area you've lived for 40 years) and move closer to family to watch the grandkid grow up. Then after six years you decide you don't like the area and move back to the ol' neighborhood. In the meantime that neighborhood's prices have doubled, so you buy at the top of the market (getting a 30-year mortgage in your 70s) and then watch values crash. Of course your mortgage's interest rate doesn't crash, but you don't refinance because another set of b*****ds would screw you on the refi expenses. I mean, c'mon, $25 for a recording fee?!?

So your Social Security may rise, but Medicare premiums go up along with SS raises. You bring on a raft of new expenses (including that mortgage) and watch your portfolio lose to inflation. You'll argue over every dollar with your spouse, turn off all the lights, and wear two sweaters in winter. And since you're "only" in your 70s, you'll eat cat food before you touch the portfolio's principal.

Then you'll review all of that "incredibly bad luck" with your kids and son-in-law ad nauseum infinitum.

We're getting ready to visit them next month, for the first reunion since they left the islands in early 2007. Can you tell how much I'm looking forward to it?
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Old 05-18-2009, 10:55 PM   #6
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Originally Posted by Nords View Post
Ooh, ooh, I know! You're describing my parents-in-law, who were born during the Depression.

First you take a lump-sum early-retirement package and put it in the 1990s stock market. Then you get traumatized by 2000-2002 and take what's left out of the stock market. Once it's in CDs & short-term Treasuries, you watch the APY wither away to 2-3%.

Then you leave it in CDs & Treasuries for the next six years, missing out on everything except rising interest rates (and inflation). Don't trust those I bonds or TIPS-- the b*****ds manipulate the CPI to exploit the taxpayers, and when deflation hits they'll be worthless. (The bonds, not necessarily the b*****ds.) When the credit markets lock up, you watch your 5-6% APYs wither away to 1-2%.

For extra bonus points you sell your home (in the area you've lived for 40 years) and move closer to family to watch the grandkid grow up. Then after six years you decide you don't like the area and move back to the ol' neighborhood. In the meantime that neighborhood's prices have doubled, so you buy at the top of the market (getting a 30-year mortgage in your 70s) and then watch values crash. Of course your mortgage's interest rate doesn't crash, but you don't refinance because another set of b*****ds would screw you on the refi expenses. I mean, c'mon, $25 for a recording fee?!?

So your Social Security may rise, but Medicare premiums go up along with SS raises. You bring on a raft of new expenses (including that mortgage) and watch your portfolio lose to inflation. You'll argue over every dollar with your spouse, turn off all the lights, and wear two sweaters in winter. And since you're "only" in your 70s, you'll eat cat food before you touch the portfolio's principal.

Then you'll review all of that "incredibly bad luck" with your kids and son-in-law ad nauseum infinitum.

We're getting ready to visit them next month, for the first reunion since they left the islands in early 2007. Can you tell how much I'm looking forward to it?
I would call that "fixed outcome".
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Old 05-19-2009, 04:52 AM   #7
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Hmm, Nords - no bitterness - eh? They've been gone for at least a year and a half - are you all still interacting with them so much that the "b*****ds* are getting you down? :-)

Have fun on the mainland - hey and you'll be near ground zero for the latest government buffoonery! Watch your tax dollars swirl down the Potomac.....
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Old 05-19-2009, 10:15 AM   #8
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Quote:
Originally Posted by Nords View Post
Ooh, ooh, I know! You're describing my parents-in-law, who were born during the Depression.

First you take a lump-sum early-retirement package and put it in the 1990s stock market. Then you get traumatized by 2000-2002 and take what's left out of the stock market. Once it's in CDs & short-term Treasuries, you watch the APY wither away to 2-3%.

Then you leave it in CDs & Treasuries for the next six years, missing out on everything except rising interest rates (and inflation). Don't trust those I bonds or TIPS-- the b*****ds manipulate the CPI to exploit the taxpayers, and when deflation hits they'll be worthless. (The bonds, not necessarily the b*****ds.) When the credit markets lock up, you watch your 5-6% APYs wither away to 1-2%.

For extra bonus points you sell your home (in the area you've lived for 40 years) and move closer to family to watch the grandkid grow up. Then after six years you decide you don't like the area and move back to the ol' neighborhood. In the meantime that neighborhood's prices have doubled, so you buy at the top of the market (getting a 30-year mortgage in your 70s) and then watch values crash. Of course your mortgage's interest rate doesn't crash, but you don't refinance because another set of b*****ds would screw you on the refi expenses. I mean, c'mon, $25 for a recording fee?!?

So your Social Security may rise, but Medicare premiums go up along with SS raises. You bring on a raft of new expenses (including that mortgage) and watch your portfolio lose to inflation. You'll argue over every dollar with your spouse, turn off all the lights, and wear two sweaters in winter. And since you're "only" in your 70s, you'll eat cat food before you touch the portfolio's principal.

Then you'll review all of that "incredibly bad luck" with your kids and son-in-law ad nauseum infinitum.

We're getting ready to visit them next month, for the first reunion since they left the islands in early 2007. Can you tell how much I'm looking forward to it?
Ouch - that was painful just to read.

heh heh heh -
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Old 05-23-2009, 10:01 PM   #9
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Hmm, Nords - no bitterness - eh? They've been gone for at least a year and a half - are you all still interacting with them so much that the "b*****ds* are getting you down? :-)
I'm slowly getting over it, but spouse insists on talking to them 2-3x/year. And the anticipation of this visit may be far worse than the actual event.

Our kid is spending a few days with the grandparents before/after USNA's one-week "Welcome To Hell" "Summer Seminar" and we're joining the party when USNA is done with her. They're more interested in their only granddaughter, not her parents. I'll probably spend a lot of time in the corner of the room drinking heavily solving the world's economic problems with my BIL the CPA.
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