Whether you have already claimed your Social Security benefits, or are still planning for your eventual retirement, you should probably pay attention to this news: The Social Security Administration announced last month that beneficiaries will receive a cost of living adjustment (COLA) to their benefits checks.
The COLA will begin on January 1, and has been set at a 2 percent increase. That doesn’t sound like much, but it is actually the largest COLA we’ve seen in five years. Since 2012, COLAs have been nonexistent or extremely small, due to the inflation rate remaining historically low.
If you’re wondering how much a 2 percent “raise” will affect Social Security beneficiaries, keep in mind that exact check amounts are based upon your earnings record as well as the age at which you claimed benefits. The average Social Security recipient will see an increase of 27 dollars to their monthly checks, bringing their benefit amount to $1,404 per month. Your own benefit might vary slightly or even significantly from the average, but it will increase by 2 percent of the current amount beginning in January.
These cost of living adjustments are designed to help retirees cope with rising prices while living on a fixed income. However, just because the inflation rate is low, doesn’t mean your own expenses will fall in line with that expectation. Retirees often report frustration at low COLA amounts, as they watch the cost of healthcare or other expenses soar.
So, this is a good reminder that Social Security is only one part of a comprehensive retirement plan. Remember to establish other forms of income before you retire, and to take measures to safeguard that money. Give us a call, and we can help you put together a retirement income plan that will hopefully suit your future needs.