Retirees and pre-retirees sitting down for breakfast are getting squeezed. And their financial advisors are finding that it’s not just their orange juice.
Out of all traded stock indexes, bond ETFs, currencies, and commodities, the three biggest investment winners in 2024 were cocoa, up 178 percent, coffee, rising 70 percent, and, yep, orange juice, which soared 55 percent, according to FactSet. Coming in a not-so-distant fourth place was natural gas, which soared 45 percent.
All four trounced the S&P 500’s not-too-shabby return of 23 percent for the year.
Of course, the surge in prices for all these commodities was not immediately passed through to consumers, otherwise there would have been mobs of retirees at IHOP and Starbucks stores nationwide brandishing pitchforks.
That said, the price of breakfast and the cost to cook it certainly did shift higher over the course of the year, even if the full force was not completely felt at the breakfast table. In November 2024, the Producer Price Index (PPI) for final demand increased 3 percent from the previous year, the largest 12-month increase since February 2023. The PPI for December 2024 is scheduled to be released on Jan. 14, 2025 at 8:30 a.m. Eastern Time.
According to the Society of Actuaries (SOA) Research Institute’s recently released biennial Retirement Risk Survey, rising food costs and daily expenses are significantly impacting 51 percent of pre-retirees and 35 percent of retirees. Meanwhile, rising utility costs are affecting 45 percent of pre-retirees and 29 percent of retirees.
As a result, the SOA says this has led more pre-retirees to adjust savings strategies, particularly for individuals with annual incomes of less than $100,000.
“Even though inflation rates have come down, many are still affected by high prices for housing and groceries,” said Anna Rappaport, current chair of the SOA Committee on Post-Retirement Needs and Risks, in a statement.
The findings of the SOA study were reinforced by a recent survey by legal-assistance provider Atticus, which revealed that 75 percent of seniors are worried their Social Security COLA (Cost-of-living Adjustment) increases won't keep up with their actual cost of living. The Social Security Administration recently announced a 2.5 percent COLA for 2025, down from increases of 3.2 percent in 2024 and 8.7 percent in 2023.
Furthermore, the study showed that 43 percent of seniors lack confidence in Social Security’s ability to provide stable benefits over the next decade. And 87 percent of seniors surveyed plan to supplement their Social Security income, with 9 percent resorting to full-time jobs.
Paula Nangle, president and senior wealth advisor at Marshall Financial, said her clients have “definitely been commenting on inflation more recently,” especially the rising cost of insurance. One client recently decided to make a major lifestyle change and sold a second home to reduce expenses, she said.
“When helping our clients plan for retirement, we typically build in an inflation rate in the long-term plan and implement an investment plan that strives to keep pace with inflation. To help our retired clients manage spending, we send most a monthly ‘paycheck’ from their investments. It helps to create guardrails and keep them on track in retirement,” Nangle said.
Similarly, Christine Damico, financial planner at Domain Money, is also seeing her clients “feeling pinched by inflation" on their food and daily expenses. Meanwhile, she said she focuses on what she is able to control, most notably their spending patterns.
“First, we’re reviewing their 2024 living expenses and seeing where they can cut back in 2025. We prioritize the major spending categories like food, travel, entertainment, and housing. For example, if we see a client’s food budget is 70 percent eating out, can they shift more of their spending to groceries instead?” Damico said.
“Second, we put their funds to work,” she said. “For example, we might shift their savings out of the standard bank’s savings account paying 0.1 percent and transfer those funds to a high-yield savings account paying closer to 4 percent. For a savings account with $20,000, that could end up being an extra $800 or so over the course of a year at current interest rates!”
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