Once you retire, and your income depends upon a combination of Social Security and retirement plan distributions, it can be frustrating to watch the cost of living continue to climb. It can be even more frustrating when Social Security does not issue a cost of living adjustment (COLA).
For the past few years, beneficiaries have been disappointed by small or non-existent COLAs each January. That’s because Social Security bases their cost of living adjustments on the inflation rate, which has remained nearly flat for the past few years. However, in October Social Security announced the largest cost of living adjustment we’ve seen since 2012. At just two percent, it’s not a large COLA by any means, but perhaps it’s a sign that the days of nonexistent COLAs are coming to an end.
Two percent isn’t a lot of money; for the average Social Security beneficiary, it will equal about 27 dollars per month. Beginning in January, the average Social Security benefit will be $1,404 per month. Of course, Social Security is based upon your work record, so your actual benefit amount could deviate slightly, or even significantly, from the average.
If you’re currently receiving Social Security, or eyeing your retirement within the next few years, you’re probably happy to hear that benefits are increasing slighting. On the other hand, it looks likely that Medicare premiums will be increasing in January as well. The new rates have yet to be released, but hopefully the increase in Social Security benefits will help with the rising cost of healthcare.
If you’ve claimed your Social Security benefits but are still working, part of your benefits can be withheld until you reach full retirement age. The earnings threshold will increase slightly this January, so you can earn up to $17,040 before any of your benefits are withheld.
It’s normal for Social Security and Medicaid to make these adjustments from one year to the next, so don’t get too hung up on small differences. However, it’s a bad idea to count on Social Security to fund your full retirement, or even most of it. Continue to meet with us regularly, or call to schedule an appointment if we haven’t yet discussed your retirement plan. Together we can plan for a stream of income in retirement, so that you aren’t too dependent upon Social Security.