In October, the U.S. Social Security Administration declared a 5.9 percent increase in the checks received by beneficiaries beginning in Jan. 2022. This is the biggest annual cost-of-living increase in the country in around 40 years. Despite this, many beneficiaries remain worried about their finances since the social security check increase is likely to be eaten up by the rising prices of goods and services.
There are over 64 million social security beneficiaries in the country who will see a rise in their monthly checks. For retired workers, the average monthly benefit will move up to $1,657 from $1565, an increase of $92.
On average, payments for couples where both receive benefits will be $2,753; widowed mothers with two kids will get $1,553; workers with disabilities will receive $1,358; and disabled workers who have a spouse and children will get $2,383.
All these increases in social benefits come as inflation has skyrocketed in recent months. The Consumer Price Index (CPI) as measured by the labor department rose to 6.8 percent in November, the fastest pace it has risen since 1982. Since last November, gasoline prices rose by 58.1 percent; the overall energy prices are up by 33.3 percent.
Food prices have spiked by 6.1 percent during the year. According to the labor department, the 12-month rise in the prices of energy and food was the fastest increase in 13 years. The cost of used cars and trucks has increased by 31.4 percent.
Shelter costs rose by 3.8 percent over the year. For many retirees who depend on social security checks for their monthly expenses, the 5.9 percent boost may not be enough to maintain a decent standard of living.
“At first it was more, ‘Wow, look at how great this is’… Now it’s a recognition after they see this latest CPI news, ‘Oh, that’s why they did it’… [The beneficiaries] haven’t even received this larger check yet… So they’re experiencing these higher prices without even getting more money, which will start in January,” Kelly LaVigne, vice president of consumer insights at Allianz Life Insurance Company of North America, told CNBC.
According to a recent poll by Allianz, 25 percent of Americans see inflation as the biggest threat to their retirement plans, a massive increase from last year when only 8 percent held such a view. Though social security was designed as supplementary to retirement income, the truth is that roughly four in ten older Americans rely on social security checks as their sole income. This puts a vast number of retirees at the mercy of rising prices.
In an interview with CBS News, Laurence Kotlikoff, an economics professor at Boston University, said that the biggest mistake people make with regard to their retirement asset is claiming it prior to turning 70 years old. At that age, their monthly payments will be at their peak.
Individuals who claim social security benefits before hitting their retirement age will see around a seven percent decrease in annual payment. Kotlikoff noted that only six percent of those who have retirement accounts wait to take out money until they hit the age of 70.
Social security benefits can be claimed at 62 years old. But waiting additional years to claim these benefits is crucial in this environment of high inflation. “You want a bigger share of your benefits protected against inflation, and that is what happens if you wait,” Kotlikoff said.