Unknown: Even though the ink is barely dry on the most recent
cost of living increase for Social Security, we're looking
forward to 2023. And there's some good news, and some not so
good news down the road. And I want to share with you some of
my thoughts. But before we get there, please subscribe to my
channel, I have over 30 years in this business, and I want to
share with you some of the conversations I have with my
clients some of the insights that I get from listening to
others so that you can do a better job of managing your own
retirements. So the word of the day is inflation. And it really
is a double edged sword. And I want to share with you how the
inflationary scenario sort of crafted where we are right now
and how it might impact how things might look in 2023. Where
are we right now. So the bad news is right, and what's sort
of underlining and causing this inflationary spike. Right now
we've all seen the headlines about supply chain issues as a
result of the pandemic, container ships are sitting out
in ports all throughout the world, unable to get the goods
on to shore. And then once they get on shore, there's a lack of
truckers who are able to get it from point A to point B. And
when they are able to get it from point A to point B, are
they able to deliver it to the stores that were headed to for
instance, have you been to the grocery store lately, seen the
price of some of the items there or even seen some of the empty
shelves, I'll share with you a story, we have a boat, small
boat, but we needed some power steering fluid over the summer,
I went to the local shop, they usually have 12 or 15 different
types of power steering fluid, they had one. That was it. And
we've all got these stories, right. So I know you've
experienced this too, as well. And I actually want to share
with you a recent chart that came out to reflect the increase
in some of these prices in one of the indexes that comes out
from the government, which is called the CPIU which tracks
retail prices. So let me take you to my screen for just a
moment. So these are some very real price increases over the
course of a year, September through September, bread is up
7% steak 22% increase, you've got gasoline at a 42% increase,
car rentals, anybody traveling, trying to rent a car, it's it's
not an illusion, it's a 43% increase used vehicles, anybody
trying to buy a used vehicle, almost a 25% increase. And
across all items that the CPIU covers, it's about a 5.4%
overall increase from last September through this
September. Now what's interesting with all of this,
and as it has impacted some of our behavior, particularly for
those who were on fixed income, it's been very difficult to find
in this low interest rate environment, with the inflation
going up and interest rates. They're supposed to be going up
but haven't been up yet. For those who are on fixed income,
they're in a bit of a conundrum. Let me share with you a story of
a friend of mine, who's 89 years old. He has been retired for 36
years. And for all that time, he's been invested in municipal
bonds. It's been great for him. But those bonds are maturing,
he's getting his principal back. And now what does he do with it
with interest rates as low as they are? So he's now having to
go into the stock market and he actually bought a basket of
dividend yielding stocks. So one of the problems is as we find
ourselves in this space right now, where inflation has kicked
up, which is the bad news. But I can say here, you know, we're
gonna go into the good news, which is, you know, what's
happened with the cost of living increase on Social Security. But
we're stuck at a place what do we do with our money now to
invest it either in bonds or CDs or the stock market where we
don't want to lock in these low low rates in anticipation of
what follows when inflation hits, which is interest rates
going up? So I did mention there is good news on this right? For
those who are on a fixed income or aren't getting social
security, we did get this massive 5.9% increase in the
cost of living, which was the biggest increase we'd gotten, in
39 years, we had been averaging somewhere in the vicinity of
about one and a half percent over the past 15 years or so,
even though the basket of goods that we buy, have gone up at a
higher rate. Now, as I mentioned, 2022, the cost of
living adjustment increase is 5.9%. That's based on the third
quarter snapshot of the CPI W which I don't want to get too
technical here, But it also tracks pricing from the
government. But that's the metrics that the social security
administrators use. It's the third quarters year over year
increase in that benchmark and what they'll do next year for
the cost of living. And again,
we got a 5.9% increase. So what's going to happen next
year, and these are all questions about Social Security,
right. And, as you know, or may not know yet I have published my
fourth book, don't outlive your money in retirement. And the
second chapter is devoted to Social Security, what I want you
to do is go to our banner, click on free chapter, I will get you
all the answers that you need for social security. And we'll
give you some more clarity in terms of what you need to do to
maximize your household income. And the strategy you should
take. Believe it or not, there's 567 different strategies. So
click on the banner. So let's take a look at what might happen
next year. This is my opinion, certainly no guarantees. Looking
forward. I just tried to lead read the tea leaves, right. So
this is from Janet Yellen, treasury secretary of the United
States. She says on a 12 month basis, the inflation rate will
remain high into next year because of what's already
happened. But I expect improvement by the middle to end
of next year, second half of next year. And then there's this
from the Fed Chairman, Mr. Jerome Powell, inflation has
increased notably, and will likely remain elevated in coming
months before moderating. So what is all of this mean? Well,
from my perspective, the way I look at it, and I've talked to
people about the supply chain and inflation, and it does
appear, no matter how much Wall Street wants to tell us, this is
transitory, we're going to get back to normal pretty soon,
there's a lot of things that seem to be broken or having
trouble getting repaired, that would bring the inflation
numbers down very quickly. So I do anticipate, again, no
guarantees that by the third quarter of next year, when
Social Security is looking to post their cost of living
adjustment for 2023, that it could again, be a very
significant number, just like they did for 2022. Now the bad
news for that is the following. The trustees also mentioned with
the 5.9% increase going into 2022 that as a result, the
liquidity for funding 100% of the promises, Social Security
has made that number was out to like 2034. Whereas if we didn't
do anything from now until 2034, the Social Security
Administration trustees say that they would only be able to pay
about 80% of those promises by the year 2034. Assuming nothing
was done in Congress. As a result of the recent cost of
living increase. The trustees actually brought that back a
year from 2034 to 2033. So we're gonna have to stay tuned to
what's going to happen with cost of living inflation. What's the
impact on us on investors and retirement? So check out our
playlist and stay tuned.