Will my Social Security benefit keep up with inflation?
Yes!
One of the most attractive features of Social Security is that every year the government adjusts the benefit for inflation. Known as a cost-of-living adjustment, or COLA, this inflation protection can help keep up with rising living expenses during retirement. The COLA is quite valuable; although some will say it doesn’t do enough.
Because the COLA is calculated based on changes in the consumer price index (CPI), the size of the COLA depends largely on broad inflation levels determined by the government each year. For example, in 2009, beneficiaries received a generous COLA of 5.8%. But retirees felt slighted in 2010 and 2011, when inflation was much lower during the recession. There was no COLA in either of those years! For 2012, the COLA came back at 3.6%, but dropped to less than 2% in the next few years. For 2015, it’s 1.7% and expected to be 0% for 2016. Each October, the COLA for the following year is announced.
For many retirees increased medical expenses may become a burden during retirement. Medical expense inflation has long outpaced other parts of the economy.
There are many cost-of-living indexes that can be used, however many retirees argue that the COLA never seems to keep pace with their personal expenses.
Either way we see this as a valuable benefit. Hopefully someday the Feds will get the COLA more in line with actual retiree expenses.
There are numerous factors that impact your decision of when to claim Social Security benefits. It is important to your retirement planning. Don’t do it alone! You should discuss Social Security with a financial professional who can help you weigh all the factors.
As always we are here to help create your best 2nd Half.
Contact us by email or call the office at (719) 630-0600 to set up an appointment.
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1-419803 9/16/2016
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
All illustrations are hypothetical and are not representative of any individual’s specific situation.
