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Does Inflation affect Senior Citizen differently?

The U.S. Bureau of Labor Statistics (BLS) thinks so. Ever since the early 1980s, the agency has calculated a separate consumer price index for elderly consumers (CPI-E), which can more accurately reflect the spending habits of older Americans. This is because housing presents a greater expense for the elderly, when you consider many pay high fees for assisted living and nursing home care. Health care expenses can assume a greater proportion of the elderly household budget than for the rest of the population. The CPI-E takes this expense into consideration and applies greater weight to this category when determining the rate of inflation. Since its inception, housing and health care costs have risen at a faster rate than other weights, such as transportation, education and food.1 

Social Security benefits, however, are automatically adjusted for inflation each year against the CPI-W, a measure that captures price changes in the average set of goods purchased by urban consumers. So the adjustments to Social Security benefits are based on wage earners and clerical workers. But as you can see, this inflation adjustment may not accurately help retirees keep pace with the rate of their own inflation.2 

There has been some speculation that Social Security benefits should be adjusted using the CPI-E or other inflation measure that more accurately reflects the spending habits of the elderly rather than working Americans. Yet with all of the brouhaha concerning the federal budget and the national deficit, the current sentiment is headed in a different direction. In fact, President Obama's Administration has proposed changing the basis for Social Security inflation adjustments to the "chained CPI" in order to slow the growth rate of benefits. The chained CPI takes into account consumers' tendency to substitute higher inflationary items with lower-cost alternatives when necessary, thus yielding a lower rate of inflation growth.3

Unfortunately, for retirees, their inflationary items - such as medical care and senior housing - do not lend themselves as efficiently to shopping for lower-cost alternatives of equal quality. 

Bureau of Labor Statistics, "Current Price Topics: The Experimental Consumer Price Index for Older Americans," February 2012;http://www.bls.gov/opub/focus/volume2_number15/cpi_2_15.htm .
Bloomberg Businessweek, Why 'Chained CPI' Rattles the Elderly (andhttp://www.businessweek.com/articles/2013-04-10/why-chained-cpi-rattles-the-elderly-and-soon-to-be .


Info compliments of Andre Rafal arafal@strategyfinancialgroup.com.

Your Digital Life when you die

What happens to it? http://bit.ly/1bwcrFV

Policies surrounding death vary among some of the internet’s most prominent companies:

  • Twitter will deactivate an account upon the request of an estate executor or a verified immediate family member once a copy of a death certificate and other pertinent information is provided.
  • Facebook has two options. First, the site enables profiles to be turned into memorials. The account is locked, but other users can still interact with the deceased’s profile by posting comments, photos and links.  The other option is to remove the account, upon special request by an immediate family member or executor.
  • Google has recently established a new feature called “inactive account manager,” which prompts users to decide the fate of their accounts should they die. If the account user does not make a selection, Google’s policies are pretty strict. It warns survivors that obtaining access to a deceased person’s email account will be possible only “in rare cases.”

Wading through different policies for every account can be difficult, especially since most people do not designate someone to take care of their digital accounts in case of death. The issue is further complicated depending on the state.  Along with Virginiasix other states have laws governing access to the digital assets of the deceased – Connecticut,Rhode IslandIndianaOklahomaIdaho and Nevada.

Do You Have a will?

I know you think you'll live forever, but the reality is that you won't.  Every year the vast majority of Americans who die do so with having prepared a valid last will and testament.  For the past 3 decades that number has hovered between 70 and 80%1

My late daughter-in-law died in her 40's, my stepmother in her 30's and believe me those of us left behind had a mess to unscramble.

Federal law has incentives so we can let our wishes be known: child custody, property distribution and our last wishes.  A carefully planned will can actually minimize the costs to your estate.

If you haven't talked to your adult children about your wishes or your parents haven't talked to you, encourage them to MyDirectives.com where they can fill in their desires without having to discuss it.  For some folks, this is easier than face to face.  It also means it's accessible to family members who live far away.

Naturally you have to give them the information for them to access your directives, it seems pretty secure from prying eyes.