Millions of Social Security beneficiaries will get an additional $92 each month due to a cost-of-living adjustment (COLA) for increasing costs during the coronavirus epidemic.
Social Security will replace approximately 40 percent of pre-retirement income for the typical wage worker. Meanwhile, most seniors would adjust 70 percent to 80 percent of their expenses.
Given the increase in senior healthcare expenses over time, having that additional money is critical. As a result, individuals who rely significantly on Social Security often face financial difficulties.
Starting next year, the increased COLA, which is the biggest in 39 years, will provide the typical retiree with a 5.9 percent increase in total benefits. Over the last ten years, cost-of-living adjustments have averaged 1.65 percent.
With the revised adjustment, the average retiree will get $1,657 per month, while a typical couple would receive $2,753 per month.
Social Security Benefits To Increase In 2022: COLA Affecting People
Cliff Rumsey, a retiree on Hilton Head Island, South Carolina, who is caring for his wife, told the Associated Press that he had witnessed cost-of-living hikes in many categories since the pandemic started. To be exact, he noted the difference in food prices, caregiver salaries, energy expenses, and personal care items.
For approximately 1 in every 5 Americans, the COLA has an impact on their family budget. This comprises almost 70 million individuals, including Social Security beneficiaries, disabled veterans, and federal retirees. It will be the largest rise in the lives of baby boomers who retired within the past 15 years.
The COLA, according to policymakers, was created as a safeguard to prevent Social Security payments from losing buying power in an ever-changing economy, not as a pay raise for retirees. About half of seniors live in homes where Social Security payments account for at least half of their income. A quarter depends entirely or virtually entirely on their monthly payment.
COLA Keeping Up With Inflation
In reality, this emphasizes the need of seniors having sources of income other than Social Security. COLAs have always failed to keep up with inflation, and now, after years of parsimonious COLAs, recipients are playing catch-up.
Seniors who have other sources of income, such as retirement plan withdrawals, have much more choices for keeping up with their bills and controlling their living expenditures. As a result, future retirees should do all possible to avoid ending themselves in a similar situation.
For the past few decades, generous COLAs from Social Security have been few and far between. Even when they are more resilient, they are susceptible to deterioration. Independent savings and other methods for producing retirement income are the actual ways for seniors to achieve financial stability.