For Mark Roberts’ Use: Back in your working days, you looked forward to your annual raise. It helped to offset inflation, and provided you with extra cash to spend on luxury items or save for retirement.
Now that you’re retired, you may find that your “raises” from Social Security are less exciting. But you still need to pay attention to this news, because it will affect your budget for 2015. Social Security has announced that the Cost of Living Adjustment (COLA) for 2015 will amount to 1.7 percent added to your current benefit amount.
How much is 1.7 percent?
- For the average single person collecting Social Security, this increase in benefits will amount to about 22 dollars.
- For the average retired couple claiming benefits, the increase will be about 36 dollars.
It’s important to keep in mind that these numbers are just averages. Your benefits increase will vary somewhat according to the original amount of your monthly check, which was based upon your earnings record. You should have received a letter from the Social Security Administration informing you of your new monthly check amount.
Many retirees may feel somewhat dismayed by this year’s COLA. Despite increases in the prices of food, medical care, and prescription medications, 2015 marks the third year in a row that COLA was calculated below 2 percent.
Unfortunately, your benefits increase may not accurately reflect your true cost of living increase over the past year. This is because COLA is tied to the Consumer Price Index, which measures the average prices of a wide variety of goods and services. While the CPI is a great measure of overall inflation, critics say that senior citizens are disproportionately affected by certain prices. Therefore, COLA should be calculated in such a way that gives more weight to prices of things like prescription medications, which affect seniors more heavily than the general population.
As politicians continue to debate the issue, what is the bottom line for senior citizens? Remember that Social Security is only meant to serve as a supplement to your retirement income. Sound financial planning will go a long way toward offsetting the affect of inflation. Don’t count too heavily on Social Security, and meet with your financial planner to discuss your budget and lifestyle expectations over the course of your retirement.