Just around the corner, there is one of the largest boosts in Social Security payments in the USA. Luckily, many retirees will see that their checks go up by 8.7%, which is both necessary and fair. Many are already thinking about the things they can spend it on and how it will benefit them. However, not many people have thought about some of the negative effects of the Social Security raise in 2023.
Despite the fact that you as a retiree or Social Security beneficiary will receive more money, it does not mean you will be able to buy more things. Sometimes, if prices keep going up you will eventually be able to buy fewer things indeed. However, it is a very good moment to reflect on all your expenses. Make a list of every single cent you spend and see the unnecessary expenses in order to cut them down.
COLAor cost-of-living adjustments just try to help people cope with the current prices. In this way, they can make sure that retirees can at least have a little help to face inflation and soaring prices. Remember that when there is very low or no inflation and you get a salary increase, it is very beneficial for your financial situation. Nonetheless, we are talking here about a very different situation.
Social Security benefits will increase, but will retirees’ investments go up too?
Bear in mind that many retirees have some investments. Once you have invested your money, you expect to get some interest. This interest will never be as high as 8.7%, which is the COLA in 2022. Especially if you invest in a very conservative way, in order to make money but not risk it. If you are not making as much as the COLA increase, you are not making enough to cope with inflation.
Purchasing power decreases and so do your investment benefits. Even if you have some money in your savings account and you still get more money for it, it is extremely difficult to reach that COLA figure. Therefore, the rising cost of living is very negative for those who have savings and are not keen on taking risks in investments.
Remember that almost everything will go up next year, like some taxes, gas, electricity, food, and so on. Thus, it will be of vital importance to cut down on superfluous things and find ways to make some extra money. Social Security benefits boost can hardly cope with the cost of living and the negative side of inflation. So, it is time to make the most of your money and spend it wisely. Take care of your nest egg.