Social Security’s Largest Cost-of-Living Increase in 40 Years: Will it be Enough?
- October 31, 2022
- Phil Cannella
- 0 Comments
As inflation stayed consistently high throughout much of 2022, the Social Security Administration (SSA) announced an 8.7% cost-of-living adjustment (COLA) for Social Security beneficiaries starting in 2023. This is the largest COLA since they increased benefits by 14.3% in 1980, and it will increase the average recipients’ income by an average of $140 a month. Although increased Social Security benefits give retirees more money to pay for food, housing, and medical expenses, the team at Crash Proof Retirement® analyzed whether or not these increases will truly be enough to benefit American retirees.
Inflation and Social Security Benefits
As the economy mounted a recovery in the post-COVID-19 pandemic environment, a number of factors combined to create record-high inflation. Expansive money printing from the Federal Reserve, increased oil prices, and supply shortages for a range of goods caused retail prices to skyrocket over the course of 2021 through 2022. More recently, the war in Ukraine and OPEC’s decision to reduce oil output by two million barrels per day have crushed hopes that inflation was finally reaching its peak. Even as the Federal Reserve raised interest rates to get inflation under control, Americans are still experiencing sticker shock at the gas pump, in the grocery store, and with nearly every other purchase that they make.
When inflation soars, retirees living on fixed incomes are most vulnerable to its effects. Data from the U.S. Census Bureau shows that about half of retirees depend on Social Security benefits to make up at least 50% of their income. For about 25% of older adults, Social Security provides at least 90% of their income. When factoring in the current inflation rate of 8.2% and the 14.5% increase to Medicare Part B premiums that took effect in 2022, the 8.7% Social Security COLA for 2023 may prove to be much less significant for American retirees.
Retirement during a Recession
While many analysts are reluctant to say that the U.S. economy is currently in a recession, negative GDP growth in the first 2 quarters of 2022 did meet the strict definition of a financial recession. Also contributing to investors’ anxiety about the future of their retirement is the fact that all three major stock market indices have fallen nearly 20% or more year-over-year and year-to-date. Thanks to the Federal Reserve rapidly raising interest rates up to 3.25%, investors should expect a prolonged recession that will take years for the stock market to recover from. Once third-quarter Gross Domestic Product figures are finalized in December of 2022, a recession could become undeniable and spark an even larger selloff that will send stock market indices plunging even further.
Prolonged recessions are always disastrous for retirees, especially for those who invested their nest eggs in risky securities like stocks, bonds, and mutual funds. These investments are dependent on the stock market’s performance, and their values will drop during a stock market crash. Americans who are depending on these types of risk-based investments to provide a steady source of income during retirement are currently losing money and poised to lose more; so much so that even the largest Social Security COLA in 40 years may not be enough to make ends meet.
If you are in or near retirement and concerned that a stock market crash could wipe out your nest egg, you should know that there are steps that you can take to protect your savings and improve your income. Get in touch with Crash Proof Retirement® by calling 1-800-722-9728 so you can get educated about safe retirement investments that exist outside the risky securities industry. Other retirement planning companies in the Bucks County, PA area will not tell you about these investments which are guaranteed to protect your principal during a stock market crash, while growing your accounts with interest that is credited at rates higher than traditional retirement investments. If you are looking to secure your hard-earned nest egg and receive a steady income stream from your investments, the licensed retirement educators at Crash Proof Retirement® are the only retirement phase experts in the country that have the fiduciary responsibility and authorization to use this revolutionary retirement system. Call today to schedule your free financial checkup or visit our contact page to request an appointment online. Appointments are available in-person and through easy-to-use video conferencing.
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