Inflation doesn’t seem to hurt that bad especially when free money is on the table but you must wait for your presents until the new year!
The longer you wait to take it down a notch, the more gains you get to reap!
Clearly, Americans’ shopping sprees and savings rates since the lockdown haven’t been interrupted, or else inflation would be near the Fed’s target of 2% by now so we must use it to our advantage instead.
With 41-yr high inflation to blame, since the influx of the pandemic, a record number of Americans who planned to retire have unretired the last two years to make ends meet. This is clearly not a comforting stat to sit with in a highly developed nation like the U.S. however inflation is also the savior here and can help folks get out of the sticky mess this headwind created in the first place!
In 2023, social security benefits along with investment yields for fixed-income securities such as short-term treasuries bonds, money-market funds, and CDs, investments that you don’t have to settle for rock-bottom rates on anymore, are set to rise dramatically due to negative headwinds, namely rampant inflation and rising rates that are working in our favor when it comes to risk-free assets. I would choose a guaranteed 5% return any day over a possible -20% sell-off. There’s just too much uncertainty with equities. That’s the risk you take so play your cards right and always diversify! And if you haven’t heard already, don’t fight the Fed.
Although inflation has fortunately peaked in October of 2022 plummeting the attractive I Savings Bonds rate from a record 9% guaranteed return, social security benefits are set to be locked in at a higher rate by more than $140 per month which is certainly a decent chunk of change that will help current and future retirees next year. When retired and reliant on little to no active income and mainly passive income streams instead including dividends and interest from investments, possible rental income, business income, and RMDs from retirement accounts, everything counts!
Retiring sounds nice until you don’t know how to survive and are instead reliant on the government for support. Facing this stage is dangerous and by far the worst nightmare that any earner, especially those in high marginal tax brackets face.
With over half of earners who net more than $250k annually report living pay-check-to-pay-check, their priorities are clearly out of order. Plus it’s embarrassing to find out you cannot support yourself in retirement even though you earned a 10%+ income for 30 years! It’s not what you earn, but rather how much you keep folks. This never changes and is especially true the more active income you rely on! It won’t go up forever.
That’s why it’s particularly important before making any large purchase or receiving a lump sum and being tempted to spend it all to think twice about your 70, 80 yr old self and ask them how they think you should spend it. They’ll likely say two things: invest it in yourself through education or experiences or stuff it in the market.
Be proud of the decisions you made back in the day to take care of yourself today. Don’t shorten your life just by splurging it on silly emotion-prone decisions made one ugly night in your twenties! It’s not worth it!
Social Security Boost
This extra $140 in social security payments per month in 2023 is expected to equate to a COLA (cost-of-living adjustment) of 8.7% in 2023. This $146 per month benefit according to CNBC will go from $1,681 to $1,827 in 2023 for the average retiree.
Certain individuals who are Supplemental Security Income beneficiaries (SSI) which accounts for fewer than the total Social Security beneficiaries in the U.S., will see the monthly payment bump up to $73 per month from $841 to $914.
When considering Social Security payment increases, it’s important to consider COLA adjustments to the Social Security payment and be aware when you can get the greatest social security benefit package which is typically at the average retirement age of 62 when you first start receiving payments.
Benefits will increase if you delay the payments and wait till 70.
As a 22-year-old, contrary to popular belief, I find since tax laws, rules, and the ins and outs of retirement change each year, it never hurts to become familiar with them at this stage in your life.
Whenever we hear retirement planning, emergency savings, and or estate planning which includes setting up a will and or trust, it always seems like a mysterious topic for most Americans who dread thinking about getting older. However, the more you delay important discussions and decisions that really take less time than we imagine, the harder it will be to have them later on. Procrastination is literally cutting up time.
Since there’s no reversing in age, planning for the worst and hoping for the best especially during the times in our lives when we expect the most support — mentally, physically, financially, emotionally, etc., brushing up on these rules will only make your life easier in the long run.
Practice diligent spending and savings habits today for a smoother ride tomorrow. It’ll come faster than you think! Just like with any role, retiring with a purpose is vital since having no goals after your career can be as insecure as inflation wreaking havoc on our purchasing power. Consider everything, including how to spend that precious time to feel really rich!