Our featured article of the month, A 6.1% Bump In Social Security?, briefly describes the potential for one of the largest COLA (Cost Of Living Adjustments) in almost 40 years. With the topic of the day centered on inflation, the rising cost of goods and services, seniors collecting SSA benefits may see quite a significant increase in their monthly benefit checks in 2022. While not a windfall, it certainly would be a welcomed adjustment considering the increasing costs in many consumers’ regular purchases of gas, groceries, and services. In reality, the increase won’t necessarily give you more, it will allow you to be able to maintain your current level of purchasing power with those dollars. Interestingly, inflation allows us to review one of the basic tenets for investing your savings, rising costs over time.
After the Great Recession, the economic recovery was modest, resulting in stubbornly low economic expansion and inflation. However, the pandemic and the global economic shutdown ushered in an unwelcomed and unintended guest; inflation. The shutdown, followed by relief benefits, has resulted in a swift increase in prices, due to the increased money supply, supply chain disruptions, and tight employment markets. While most of these things are our of our control, what is manageable is both how we spend and how we invest our money.
When building their retirement plan, many investors understand that accumulating enough assets during their working years, to supplement their Social Security benefits, is a top priority. However, upon retirement, the resources that have been accumulated must then take on the task of providing enough income to maintain and sustain their lifestyle both in the short term and well into the future. Accomplishing that task requires a balance between growth and income. Additionally, some risk, especially today with money market rates still pegged at 0%, is required. Therefore, investing your savings with a practical strategy that can provide for today with an eye on tomorrow is crucial.
COLA and Social Security.
The news keeps getting better for Social Security recipients.
It’s now projected that benefits will increase 6.1% in 2022, up from the 4.7% forecast just two months ago. That would be the most significant increase since 1983.1,2
It’s all about inflation. Social Security cost of living adjustments (COLA) are based on the consumer price index, which rose 5.4% in June — its largest 12-month increase since 2008. The official announcement is expected in October and, once it’s confirmed, the revised payment will go into effect in January 2022.3
More than 65 million Americans receive Social Security, and the annual cost of living adjustments are designed to help recipients manage higher costs. At the start of 2021, recipients saw a 1.3% increase.4
The average monthly benefit is $1,544 for retired workers. So a 6.1% increase amounts to $94 more a month. That might not be quite enough for a car payment, but it’s double the 3% raise being given to U.S. workers in 2021.4,5
Social Security can be confusing. One survey found only 6% of Americans know all the factors that determine the maximum benefits someone can receive. If you have any questions, please reach out. We have a number of resources at our fingertips that you may find helpful.6
The forecasts for Social Security benefits are based on assumptions, subject to revision without notice, and may not materialize.
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
Citations
1. Fortune.com, July 15, 2021
2. SeniorsLeague.org, May 12, 2021
3. InvestmentNews.com, July 13, 2021
4. SSA.gov, June 2021
5. SHRM.org, June 2021
6. FinancialAdvisorIQ.com, July 19, 2021