Combating Inflation for Seniors

By Max Valavanis, CFP®

Why is a gallon of gasoline up over a dollar from a year ago, and why are house prices skyrocketing to unbelievable levels? Of course, the simple answer is inflation, but why is this happening? The U.S. Bureau of Labor Statistics published the 12-month increase in Consumer Price Index (CPI) on September 13th, and the numbers are still worrying. At the time, the CPI rose 3.7%; a relatively low rate compared to a year ago. The constant injection of money from the Federal Reserve and the multitude of assistance programs since early 2020 inflates the country’s money supply. These policies coupled with supply chain shortages are one of the main reasons why the cost of food rose by more than 4% in the last year.

     However, there is always a silver lining to be found. Pay raises tend to increase as inflation rises. According to Mercer Compensation Planning Survey, wages are estimated to increase by 4.1% in 2023. While this appears to be good news for the nation, unfortunately, it does not affect seniors in the same manner. Although the Social Security Administration recently announced a cost-of-living adjustment (COLA) of 8.7% for 2023, the purpose of Social Security Benefits is only to replace roughly 40% of pre-retirement income. As a result, many retirees will still have a gap in their purchasing power compared to pre-COVID. While some have the distinct advantage to increase their Pensions or 401(k)s by the same amount, many do not. The highly acclaimed Florida Retirement System significantly decreased the benefits supplied by cost-of-living adjustments in 2011. This policy change negatively affects more than 400,000 retirees who rely on the state to fund their lifestyle, and this issue is exacerbated during high inflation periods like the one we are currently experiencing.

     How then do you combat inflation? This is the burning question on many of my client’s lips. Like all personal financial planning advice, the answer depends on the person. For many, the first step is revisiting their portfolios. In a time where CD rates are surging, and the equity markets are nearing all-time highs, attention and possible adjustments to investments becomes the priority. Many clients may want to be too conservative too early and risk the possibility of outliving their assets. In the financial sector, the term for this is superannuation. On the other hand, many insist on participating as much as possible in aggressive equities and endanger their hard-earned assets in a potential stock market crash.

     Our goal at ValaVanis Financial is to find the ideal portfolio for every client. With increased inflation, the prospect of finding that ideal portfolio becomes more crucial and yet all the more complicated for the investor. If you are worried about inflation and how it may affect your lifestyle, give us a call.


Max ValaVanis, CFP® is a co-owner of ValaVanis Financial in downtown Melbourne and in Rockledge. Max specializes in lifetime income planning for Retirees while protecting principal.  Max can be reached at 321-956-7072.