The largest cost-of-living-adjustment since 1982 to impact 90% of seniors.
On October 13, the Social Security Administration announced that Social Security benefits for tens of millions of Americans will increase in 2022. The press release stated the following:
“Social Security benefits for approximately 70 million Americans will increase 5.9 percent in 2022.
The 5.9 percent cost-of-living adjustment (COLA) will begin with benefits payable to more than 64 million Social Security beneficiaries in January 2022.
The maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $147,000.”
Biggest leap since 1982
This 5.9% leap in the annual COLA is the largest since 1982. According to the Social Security Administration, retirees will see an average of $92 added to their monthly benefits next year, raising the typical amount to $1,657.
To put in perspective, almost 9 out of every 10 people over the age of 65 receive Social Security and collectively, the social security payments make up about a third of their income (although that number is much higher for lower-income seniors).
Keeping pace with inflation?
Of course, many factors went into making this COLA decision, including inflationary data points and when the Fed might taper its bond-buying program to curtail inflation. Periodic reports from the Bureau of Labor Statistics have also shown increases for indexes such as Consumer Price Index for All Urban Consumers and All-Items Index.
When to file for Social Security
Social Security benefits constitute a big part of many retirement plans. Advice abounds about how and when you need to file. What is best for you and your family?
Generally, you can file for your Social Security retirement benefits when you reach age 62, but doing so will reduce your benefits by as much as 30% below what you might receive if you wait until your full retirement age. Depending on your situation, it might be best to delay filing to maximize your lifetime benefits.
If you wait until your full retirement age –which is between 66 and 67 for most people– you will get your full benefit. If you can, consider waiting until age 70, which will increase your benefit because you will have earned what is called “delayed retirement benefits.”
In other words, there is no one-size-fits all answer to when you should start receiving Social Security.
Social Security is only part of retirement
It is important to remember that although Social Security plays a very important role in supplementing one’s retirement income, it was never meant to be the only source of income.
In fact, even the Social Security Administration states that Social Security benefits will –at best– cover about 40% of the typical worker’s pre-retirement income, but the key word is “typical” because everyone is different.
To make matters more dire, those contemplating retirement –which is everyone– should know that Social Security has a funding issue: by the year 2033, the Social Security trust fund will be at $0 and will only collect enough taxes to pay about 76% of scheduled benefits.
Make sure you plan with your financial consultant
Talk to your financial consultant to make sure your retirement planning is not dependent on Congress taking action.
At Popular, we are here to guide you and help prepare for retirement. If you want to start or review your retirement strategy, contact Popular’s team of experts at firstname.lastname@example.org.
Source: Financial Media Exchange
The information and general descriptions found in this article are designed to help you understand some of the factors you should generally consider when evaluating the appropriateness of any strategy or investment within your retirement plan. Any description included is for informational and educational purposes and for your independent consideration only; it is not to be regarded or viewed as advice or as a suggestion to take (or refrain from taking) any particular action. By providing this information, we assume that you can evaluate this information and the general descriptions found here to exercise your independent judgment. Banco Popular de Puerto Rico, its subsidiaries and/or affiliates are not engaged in rendering legal, accounting or tax advice services. If legal, accounting, or tax advice services are required, you should seek the services of a competent professional. Insurance and investment products are not insured by the FDIC, they are not deposits or obligations of, nor are they guaranteed by Banco Popular, its subsidiaries and/or affiliates. Investment products may lose value. Some insurance products may lose their value.