Seniors Hit Hardest by Inflation

America’s senior citizens experience a higher overall inflation rate than the nation at large, according to the federal agency charged with tracking the costs of goods and services.

Fears of inflation and its impact on the elderly have heightened in the post-Recession economy that sees rising costs for food, fuel and health and diminished savings for retirement. To better track how inflation affects the elderly, the U.S. Bureau of Labor Statistics calculates an experimental price index for Americans aged 62 or older in addition to its more widely known Consumer Price Index or CPI.

The CPI measures changes in prices for a market basket of consumer goods said to represent the spending habits of 87 percent of the U.S. population. The experimental CPI-E takes a closer look at how these changes impact the nation’s senior citizens, and indicates that seniors have experienced a steeper increase in living expenses than the population at large.

In the 12 years between 1997 and 2009, the CPI-E measured an inflation rate of 36.1 percent for retirees, compared to an increase of 33.0 for most Americans, the BLS reports. Rising health care costs account for much of the discrepancy. Seniors devoted a substantially larger share of their total budget to health care than the population at large (11 percent vs. 6.5), while prices for medical care increased more rapidly than prices as a whole.

The elderly are also more likely to own their own home, so they also paid a higher proportion of their income on owner-occupied housing (32 percent vs. 25 percent) and less on rent (3.8 percent versus 6 percent) than the rest of the population, said the BLS.

A bill introduced in Congress in January would require cost-of-living increases for Social Security benefits - currently adjusted for inflation as measured by the CPI - to be computed according to a consumer price index for elderly consumers. The bill has been referred to the Subcommittee on Social Security for the House Ways and Means Committee.

Meanwhile, our research shows that Americans are growing increasingly fearful of the threat of inflation. Nearly 70 percent of investors with $100,000 to $1 million listed inflation as a key concern in March, compared to 66 percent in December. Nearly two-thirds of investors with $1 million to $5 million said they were worried about inflation in March, compared to 61 percent in December.

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