How retirees can cope with rising inflation | Lifestyle.INQ

OCTOBER 27, 2022

Aside from the poor, retired seniors are hurt the most by rising inflation.

Believe it or not, the first time I was exposed to inflation was in my basic economics class in college.

Why? Because from early childhood up to the time I started working in the early 1960s, inflation was unheard of in our country. For almost two decades, the prices of everyday products and services remained the same, because our Philippine peso was legally pegged at 2 to US$ 1, and the Philippine economy was healthy and growing, the pacesetter in Asia, next only to Japan.

Year in and year out, ordinary working people could plan their household budgets with confidence. And any salary increase meant additional purchasing power and the opportunity to put more savings in the bank.

Look at the following:

The basic bus and jeepney fare around Manila was 10 centavos. The long ride from Quiapo to Cubao was only 15 centavos (and there was hardly any traffic).

The price of a liter of gasoline was between 18 and 25 centavos (there were two variants, regular and higher-octane premium).

A live chicken sold for P1.25 to P1.50 (there were no dressed chicken brands until later).

A 7-oz bottle of Coke stayed at 10 centavos from my grade school to college years, and it went very well with a 25-centavo hotdog sandwich for recess. Even better, Cosmos Sarsaparilla (Sarsi today) sold for only 5 centavos.

For entertainment, you could watch a first-run movie for P1.20, and two second-run movies (called “double program”) for P.85. But you could also watch a third-run movie in a non-air-conditioned cinema for as low as 15 centavos.

You could get a brand-new car for as low as P6,000, and I bought my first ever, a secondhand postwar Pontiac, for only P600.

Abrupt end

Then one day in the early 1960s the government announced that the official peso to dollar rate was changed to 4:1 effective immediately. Our idyllic economic world came to an abrupt end, and things have never been the same since then. Inflation had silently set in, and has become a huge part of our daily life.

Almost overnight, the prices of the things we bought every day had disappeared. The unrelenting march of inflation through the years has resulted in today’s almost unbelievable price levels.

Today, the smallest bottle of Coke sells for P15, 150 times its original price. A movie ticket is priced anywhere from P150 to P250, more than 200 times what it was before.

So what is inflation? In layman’s terms, it is the sustained rise in the general price level of goods and services over a period of time.

Is inflation good or bad? In today’s economic environment, it is a reality in free economies. Moderate inflation is usually necessary to sustain economic growth. A high or rapidly increasing inflation rate erodes the buying power of a country’s currency, and its citizens have to shell out more and more money for the same items, specially food and household necessities. Simply put, everyone becomes poorer faster.

This is what is happening to us lately, where inflation has crept up swiftly to 6.7 percent from somewhere between 1.5 to 3 percent in recent years. Aside from government mismanagement, especially in the critical area of rice stocks, the recent spike in world crude oil prices and the weakening of the Philippine peso versus a strong US dollar were the major factors.

Most adversely affected

Who have been most adversely affected? These are: the poor (socio-economic classes D and E, comprising most of our population, with average monthly family incomes of about P16,000 and P5,000 respectively); fixed-income earners (i.e. salaried workers); and retired elderly people (i.e. seniors).

As one breadwinner in the “poor” segment, representative of many struggling families, said on TV, his family ended up eating only twice a day because of the sudden increase in the price of rice.

But think also of the many retired seniors who depend on their fixed (company, SSS or GSIS) pensions and their life savings, and who had already scaled down their lifestyles when they retired. Unlike working-age persons, they can no longer augment their funds with new jobs or other livelihood sources.

How can “retirees” cope in an environment of rising inflation? Here are a few suggestions:

First and foremost, pay extra attention to your health. Even for the relatively well-off, hospitalization, and even just addressing the issues of aging, is expensive. And many HMOs no longer provide health insurance coverage after age 65.

Look for good, lower-priced substitutes for the products you use regularly, e.g. groceries and toiletries. If you take vitamins, supplements, emergency drugs (antacids, antibiotics) and maintenance medication, there are fractionally priced generics and reputable local brands identical to the imported medicines your doctor usually prescribes.

If your funds are in a regular savings account, ask the branch manager of your bank for other financial products which can increase your interest earnings (although still not enough to beat inflation) with hardly any added risk, e.g. various time deposits, UITFs, money market instruments.

Quality of governance

External economic shocks aside, local inflation management depends primarily on the quality of governance of a nation’s leadership. In our country, people know that the President is practically clueless about economic and financial matters. (He even blamed US President Trump for the surge in our inflation.) So his economic managers and agency heads can’t afford to fumble.

One extreme example of an inflation crisis we experienced was in the last two years of the Marcos regime, when the inflation rate went up to over 40 percent and the banks were selling government bonds which paid up to 44 percent annual interest. Miraculously, the crunch-time Edsa revolution in 1986 saved our economy from self-destructing. This should never happen again.

Let’s hope that 2019 will see inflation go down to its former benign levels. Fortunately, there are now positive signs that this can be achieved, but a lot depends on whether the government takes the right pro-active steps in the next few months. Let’s all fervently pray it does.

Happy (inflation-resistant) New Year! —CONTRIBUTED

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