In the biggest boost to Social Security since Ronald Reagan was president, seniors will see their checks grow by an average of $92 per month in the coming year.
The hike announced earlier this week was hailed as “crucial” by the AARP, which noted that Social Security is the largest source of income for most retirees. One in four seniors rely on it almost entirely.
But not everyone is satisfied by the increase, including advocates, legislators and hundreds of thousands of people pushing for a $1,400 stimulus check to help seniors with rapidly rising prices.
If you’re one of the many Americans who need more than a modest boost, there’s a chance more help could be on the way — and there’s plenty you can do to help yourself in the meantime.
Extra large COLA still falls flat
Starting in January, some 64 million people will receive bigger payments, thanks to a 5.9% cost-of-living adjustment (COLA) announced by the Social Security Administration.
That’s the highest annual increase since 1982, when the COLA climbed 7.4%. Back then, a dollar stretched a lot further. Today, you’d have to spend more than $290 to buy what would have cost you $100 in 1982, according to a government inflation calculator.
The annual COLA is meant to maintain the buying power of seniors’ Social Security checks against such inflation, but critics say that — due to shortcomings in how the adjustment is calculated — things haven’t worked out that way.
“Over the past 21 years, COLAs have raised Social Security benefits by 55%, but housing costs rose nearly 118% and health care costs rose 145% over the same period,” says Mary Johnson, Social Security and Medicare policy analyst for the nonprofit Senior Citizens League, in a statement.
She says consumer-price data shows Social Security benefits have lost nearly a third of their buying power since 2000.
Other efforts to provide relief underway
Last week, The Senior Citizens League sent a letter to nearly every member of the House and Senate, asking for a one-time $1,400 stimulus check. More than 38,200 people have signed a petition supporting the tax-free cash, which would help seniors who have fallen deep in debt over the past year catch up.
“While the 5.9% COLA will be very welcome, it won’t become effective until 2022 and Social Security recipients are facing large price increases right now,” Johnson says.
Meanwhile, the chairman of the House Social Security subcommittee is pushing for more systemic changes.
“It has been more than 50 years since Congress has improved Social Security benefits,” says Rep. John B. Larson (D-Conn) in a press release. “Congress has failed seniors and that needs to change.”
Following the COLA news, Larson announced he will introduce a bill next week called “Social Security 2100: A Sacred Trust.”
Details are not yet available, but Larson introduced a similarly named bill in 2019 that aimed to eliminate some taxes on Social Security benefits. It would have also set a new minimum benefit at 25% above the poverty line and link it to wage levels to ensure the payouts don’t fall behind.
What you can do to take care of yourself
While struggling seniors may be encouraged by these efforts, it would be wise not to bank on their success.
Larson’s original bill attracted more than 200 Democrat cosponsors but still failed to pass. And a petition calling for regular $2,000 checks for all Americans has drawn more than 2.9 million signatures but little, if any, attention from lawmakers.
So if an extra $92 a month won’t make a major difference in your life, take matters into your own hands and try to maximize your savings while minimizing your spending:
Cut your housing costs with a refi. Interest rates are historically low right now; some 13.9 million homeowners could save an average of $293 a month with a refi, according to mortgage technology and data provider Black Knight.
Consolidate your debt. Credit cards have helped many households get through the last year, but the expensive interest will only make life harder going forward. Folding your balances into a single debt consolidation loan can cut the cost of your debt and help you pay it off faster.
Become a smarter online shopper. Deals are out there; the trouble is knowing where to look. An easy way to save time, trouble and money is to download a free browser extension that will automatically search for lower prices and coupons.
Put your pennies to work. Even if you don't have much money to spare, you can still earn impressive returns in the stock market. A popular app can help you invest your "spare change" from everyday purchases.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.