Market dip, record inflation make those nearing retirement, drawing Social Security reconsider goals
Sitting on a bench at Pullen Park, Richard Johnson took in the mid-week sunshine, with his grandchildren nearby. Despite economic pressures hurting millions of retirees, Johnson expressed confidence in his situation.
"(Retirement goals were) always very important. I always had a 401K, and an IRA. I tried to look after my retirement," said Johnson, who started saving when he was 32 years old.
Now 78, the former state trooper said his plan is managed by a financial advisor.
"It's hard to try and start retirement when you get older. Because you can't live off Social Security," Johnson explained, adding he is focused on having enough money to help with his grandchildren's education.
According to the Social Security Administration, the safety net program is aimed at replacing about 40% of pre-retirement earnings for the average worker. While it's a substantial amount, especially as retirees tend to need less money, it still doesn't come close to covering all expenses.
Rising costs are straining that figure, with COLA (Cost-Of-Living-Adjustment) at 5.9% not keeping pace with annual inflation, which was 9.1% in June.
"We know the interest rates are going to -- from all accounts -- continue to get bumped up for the rest of this year, maybe even to next year. And they're rising at an incredible rate. And what is that doing to the markets? What is that doing to their savings? What is that doing to all the things as they get ready, or if they're already in retirement, it's even scarier because they're on fixed incomes," said Brian Raleigh, President of Raleigh Wealth Solutions in Cary.
In June, a group lawmakers, including North Carolina Congresswoman Alma Adams, introduced the Social Security Expansion Act, Which would increase monthly benefits for the majority of retirees by $200, adjust cost-of-living increases, and ensure the program is solvent for 75 more years by increasing the net investment income tax, as well as applying it to certain businesses. However, there's been little movement on the legislation.
Retirees can elect to take Social Security beginning at 62 years old, though if they can wait until the full retirement age of 67, their monthly payments would be 30% higher, which operates on a sliding scale. Monthly benefits stop increasing once a person reaches 70 years old if you have not elected by that point.
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Economic concerns have also led some retirees to re-enter the workforce. According to a report from AARP, citing data by the job search site Indeed, 1.7 million Americans who were retired last year have since returned to work, largely on a part-time basis.
Feeding America reports one in 12 seniors don't have access to nutritious food, as Triangle food pantries report an uptick in requests.
With the Dow, Nasdaq, and S&P 500 all down double-digit percentages year-to-date, Raleigh suggested altering your investment strategy to minimize risks.
"We've got to be able to convert some of those assets to reliable, predictable income. And one of our favorite strategies especially in the current economic cycle, are dividend/value paying stocks, that are consistently giving you a reliable, predictable income, and you don't have to liquidate shares on an annual basis," Raleigh explained.
