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Social Security checks to rise 5.9% in 2022

Matthew Rutledge from the Center for Retirement Research at Boston College joined Yahoo Finance Live to discuss how much social security checks are set to increase in 2022 and his outlook for retirement planning amid COVID.

Video Transcript

SEANA SMITH: Social Security checks for millions of retirees, they are going to rise next year. We want to talk a little bit more about this as part of OUR retirement series brought to you by Fidelity Investments. And for that, we want to bring in Matthew Rutledge. He's the Center for Retirement Research at Boston College. And Matthew, it's good to see you. I know that this was the biggest adjustment that we have seen in quite some time, almost 40 years. When something like this happens, what factors into it?

MATTHEW RUTLEDGE: So the main thing that they do to try to decide what that raise is going to be each year-- so everybody's check goes up every January, except for a few times when the inflation's been low enough that they didn't need to make an adjustment. What they do is they look at the price index to see how things have changed from one September to the next. So over the last year, we've seen quite a big increase in the prices of lots of things, including gas, housing, a lot of retail goods.

Basically, all that money that we have from stimulus checks and people staying at home and not traveling and not spending as much in restaurants has gone into buying more stuff. And as a result, everything is more expensive. And now retirees get to get a bigger check to make up for the fact that their money doesn't go as far as it used to.

SEANA SMITH: And Matthew, speaking of this, we know so many retirees really rely on these Social Security checks. And I was taking a look at the numbers. And it was pretty astounding. From your perspective, I guess, what does this tell us about the state of retirement savings today and how ill-prepared some people are for retirement?

MATTHEW RUTLEDGE: Yeah, the numbers on the reliance upon Social Security are pretty shocking. About half of retirees get more than half of their income from Social Security. That means that there's not a lot of reliance upon individual savings, 401(k) saving or even defined benefit pensions. That means that any time that Social Security is making changes, like this big increase to reflect the cost of living or whether there is going to be a decrease in about 13 years when the system is supposed to run out of its rainy day fund, that's going to really change people's material well-being.

It's going to need reform. I think there's definitely more that we could do to try to encourage private savings so that Social Security isn't the only lifeline for a lot of our retirees. It takes a more sensible 401(k) system. It might even mean putting more of a private saving piece on top of traditional Social Security, like a lot of other countries have done.

SEANA SMITH: And Matthew, we only have about 20 seconds here, but if you could give the advice and tell retirees to do one thing that would help them in retirement, what would that be?

MATTHEW RUTLEDGE: Well, ideally, retire a little later, although that's hard advice to give to people that have very physically demanding jobs. But it is something that helps people make their savings last a little longer, increase their Social Security benefit, and make it so that they're better connected to the workforce and to a lot of their social lives as well.

SEANA SMITH: Matthew Rutledge, great to have you, Center for Retirement Research at Boston College. Thanks so much for taking the time to join--