For Mark Roberts’ Use: Whether you are currently retired or still in the planning phase, you’ve already figured out a few things: You need to establish a stable stream of income, Social Security will comprise part of that income, and that income needs to cover your living expenses and accommodate inflation.
On that last note, inflation is the reason behind periodic cost of living adjustments (COLA), issued by Social Security. Each fall, the Administration announces whether they will increase benefits payments for the following year, along with the amount of the increase. The COLA takes effect beginning January 1 of the following year.
For the past few years (since 2012, to be exact), COLAs have been small to nonexistent. Sometimes the inflation rate remains flat, and the Administration decides that an increase in benefits is not warranted. But last month, they announced that the COLA for 2018 will be 2 percent. It’s still a modest increase, but the largest we’ve seen in five years.
So, you might be wondering what 2 percent means to Social Security recipients. For 2018, the COLA translates into an extra 27 dollars per month for the average beneficiary. Of course, those numbers are based on averages; your exact Social Security benefit is calculated based upon your work history, and might deviate slightly or significantly from those figures.
Any amount of money added to retiree budgets is a good thing. However, we shouldn’t forget the lessons we’ve learned from Social Security COLAs in recent years. A benefits hike is not guaranteed from one year to the next, and sometimes the adjustment can be disappointingly small. And while inflation might remain nearly flat, that doesn’t mean your own expenses aren’t soaring for one reason or another.
The takeaway lesson here is that Social Security will probably continue to issue COLAs in most years. But we can’t be sure of how much those adjustments will be, or that they will happen every single year. So, meet with us regularly as you plan your retirement, and we will continue to discuss other ways of establishing streams of income to meet your needs.