Coming to a Bank Account Near You – Social Security’s Largest Increase Since 1981
Higher Social Security payments are hitting bank accounts everywhere, as the Social Security Administration granted an 8.7% raise for beneficiaries. The increase, the highest seen since Raider of the Lost Ark was in box offices, has brought a lot of attention.
Inflation adjustments have always been an important feature to help retirees keep pace with increasing costs of goods over time. In working years, many people enjoy annual wage increases but as these wages are replaced by personal resources, giving yourself a ‘raise’ each year can become challenging. The average retiree may expect to live well beyond their 80’s and inflation can quickly erode how far your dollar can go. Fortunately, Social Security benefits help offset some of this risk by adjusting their benefits annually.
Since 1975, the Social Security Administration has increased benefits by about 4% annually. But the increases have not come evenly. The inflationary period of the 70’s and 80’s saw significant increases, but modest increases in recent years have largely gone unnoticed as they were partially offset by higher Medicare premiums. This year is different. Not only will retirees receive an 8.7% increase in benefits, but standard Medicare Part B premiums are about $5/month lower.
After a year of adjusting to the rising costs of goods from eggs to gasoline to used cars, this news is a welcome sight.
Social Security is a key component of overall retirement health along with personal savings, investments, and income from other sources. If you are making decisions about when and how to claim your Social Security benefits, check out our list of Five Things to Consider Before Claiming.
1. Look up your Full Retirement Age
Your Full Retirement Age (“FRA”) is the age at which Social Security considers you eligible to receive your full benefits. For those born after 1960, your FRA is 67. If you claim benefits prior to your FRA, your benefits are reduced. If you delay benefits past your FRA, your benefits are increased up to a maximum age of 70. Look at your personal benefit statement for an estimate of your benefits.
2. Do you plan to continue working while you collect benefits?
If you take Social Security Benefits prior to your Full Retirement Age while working, your benefits may be reduced if you earn over a certain annual threshold.
3. What other resources do you have available?
Evaluate what you own, what you owe, and your budget. What percentage of your income will Social Security cover? Do you have other resources to cover living expenses? Evaluating your personal situation is important as it helps identify your options.
One of the most frequently cited concerns for retirees is outliving their resources. Social Security benefits are a unique part of a retirement plan because you cannot outlive them. Could it make sense for your situation to delay benefits to potentially maximize the amount you earn over your lifetime?
5. Are you married?
It is important to consider the potential survivor benefits a spouse may receive. We often consider longevity in terms of our own lifespan, but the chances are high that at least one spouse will live 20+ years into retirement. When you add complexities like an age differential, a disparity between benefit amounts, or that women tend to live longer than men, it is important to consider the financial health of a surviving spouse.
There are many things to consider when making your Social Security elections. Every person’s situation is unique, and it is important to get personalized advice from qualified financial and tax professionals.