The New Year is bringing new money to Social Security recipients, who have received a 1.7 percent cost-of-living adjustment.
On its face, the adjustment doesn’t seem like much. Without context, 1.7 percent is just a number. What does this COLA actually mean for retirees receiving Social Security?
USA Today talked to an expert – Christopher Jones, CIO of FNGN – and got an answer to that question. From USA Today:
Q: Is the upcoming cost-of-living adjustment for Social Security recipients enough to help retirees who rely heavily on Social Security?
A: While a 1.7% cost-of-living adjustment might not sound like a lot, the good news is that inflation was also quite low. In other words, the cost of most goods and services did not go up much.
Generally, this means that your benefit check will keep up with the rise in prices over time. Of course, this is only true on average. Some things went up in price by more than 1.7%, for instance health care costs, while others didn’t increase as much, or perhaps even declined in price.
Whether the 1.7% increase isenough to cover the increase in your actual costs depends on what things you actually buy. The bottom line is that the annual cost-of-living adjustment is a very valuable feature of Social Security over time.
According to Kiplinger, the average monthly Social Security benefit is $1,306. A 1.7 percent increase will give recipients an extra $22 a month.
Christopher Jones also talked about how to handle living on a fixed income that’s heavily dependent on Social Security:
Q: What do you recommend people do if they depend mostly on Social Security and don’t have enough money to pay their bills?
A: Living on a fixed income is never easy. If your monthly Social Security income is failing to cover your spending needs, there are several things you can do. One is to augment your income with a part-time job or perhaps renting out a room in your home. A little extra income can make a big difference in paying the bills. Alternatively, look at where you are spending the most money. Many times, large expenses like rent or health care costs can dominate your budget. Think of ways to reduce these big-ticket items, such as downsizing, moving to a lower-cost area, taking on a tenant, or exploring alternative health plans under Medicare. Also, make sure that the money you are spending is really needed to support a comfortable lifestyle.
Read the full interview here.
Photo Credit: 401(K) 2012 via Flickr Creative Commons License
