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|Britt Erica Tunick is an award winning financial journalist who has spent the past 17 years writing about virtually every aspect of finance. She has mastered the art of boiling down complicated financial topics for readers to understand.|
Keep in mind that, as your social security benefits increase, so does the cost of living and all of your other expenses, so review your budget accordingly.
Inflation’s Impact on Social Security and Retirement
By Britt Erica Tunick
If you have been to the grocery store, bought gas, or purchased pretty much anything lately, you have likely noticed that inflation is on the rise. Fortunately for retirees, that reality has not been lost on the Social Security Administration, which is making its largest increase since 1985.
The Social Security Administration has announced that its 2022 cost-of-living adjustment (COLA), which relies on the consumer price index to determine the overall increase in the average cost of living each year, will be a 5.9% increase. While this change will help individuals who are already retired, or those retiring soon, it may not be enough to cover all of the increased costs you might encounter and you may need to make additional budget changes to deal with inflation.
If you are already retired and heavily dependent on your Social Security income, following are a few things to consider as prices continue to soar:
Meanwhile, the increase in Social Security payments also means that cash reserves in the Treasury Department’s Old Age and Survivor’s Trust Fund are on course to be depleted by 2033 if significant changes are not enacted by Congress to increase the coffers. Social Security beneficiaries would still continue to receive 76 percent of their benefits from tax funding. While the reduction in benefits is unlikely to happen and Congress is certain to intervene by then, given how many people in the U.S. rely on Social Security benefits when they retire, it should serve as a wakeup call for anyone counting heavily on those benefits in their retirement planning.
Following are a few things to further consider and research more thoroughly when factoring Social Security payments into your retirement plans, particularly if you will not be retiring for at least another decade: