If there is a "silver lining" to all the inflation talk, it may be that Social Security benefits are expected to see a larger-than-normal increase in 2022.
Preliminary estimates call for a 4.7% cost-of-living increase (COLA) in Social Security benefits next year, which would be the highest since 2009. Benefits rose 1.3% in 2021.1 Now, one could draw from this that we have much more inflation on the horizon since usually, the program benefits don't keep up with the real cost of living.
The Social Security Administration makes its official announcement in January 2022. The Bureau of Labor Statistics bases its annual adjustment on the Bureau of Labor Statistics data in the Consumer Price Index for Urban Wage Earners and Clerical Workers, known as the CPI-W.2
A lot can change between now and January 2022, but remember that data from the third quarter of 2021 will be the basis for the COLA for next year.
In my experience, Social Security is one of the most misunderstood sources of retirement income. For example, only 33% of people in 2021 expected Social Security to be a major income source during retirement. In reality, it was a major source for 62% of retirees.3 Also, it surprises me how many people take Social Security early, even when they can afford to wait, as they'll often get more overall by waiting longer to claim, assuming they have average or better life expectancy.
Retirement may hold many surprises. But your sources of retirement income shouldn't be one of them. It's critical to have a strategy that keeps your expectations in line with reality. We'd welcome the chance to hear what you think about Social Security.
1. SeniorsLeague.org, May 12, 2021
2. CNBC.com, May 12, 2021
3. EBRI.org, 2021. “Retirement Confidence Survey”
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with the named representative, broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security.