In January, more than 71 million Americans received a 3.2% cost-of-living adjustment (COLA) increase to their monthly Social Security benefits, an average benefit check increase of $49.
The 3.2% bump is the smallest increase in three years. That’s because the annual adjustment is based on the inflation rate, which has been cooling. Still, for many retirees, the bump won’t cover the inflated cost of living.
COLA is Falling Short for Many Retirees
COLA is meant to help Americans maintain their standard of living despite inflation, but the bumps are falling short for many seniors. According to The Senior Citizens League, a nonprofit advocate for older adults, the cost of items purchased by seniors consistently outpaces COLA.
The organization also shares 80% of retirees think Congress should improve inflation protection with a COLA that more closely reflects inflation experienced by older adults—and that Social Security benefits have lost about 36% buying power. “Retirees tend to spend a bigger share of their incomes on housing and medical costs—two spending categories which tend to rise more quickly than overall inflation,” reports The Senior Citizens League.
How to Face Cost of Living Increases on a Fixed Retirement Income
Are you a retiree who relies on Social Security benefits and lives on a fixed income? Are you struggling to make ends meet because of the increased cost of living? Check out these tips to help you handle the four biggest spending categories for seniors: housing, transportation, health care and food.
- Housing: Home costs account for 36% of retirees’ annual expenses. Paying off and owning your home before retirement is ideal, but not possible for many. If your mortgage is taking a big bite out of your budget, consider selling your home while prices remain high and downsizing to a less expensive home. You could relocate to a state with lower taxes and a lower cost of living, or consider a cooperative living situation with other retirees.
Check out these 4 ways to leverage home equity in retirement.
- Transportation: Older Americans spend on average $7,160 each year on transportation. If you and your partner each have a vehicle, consider selling one vehicle and sharing. This would free up the money you’re spending on the loan (if you don’t own outright), auto insurance, maintenance and repairs for one car. You could also consider public transportation, depending on where you live. According to the American Public Transportation Association, you could save more than $13,000 per year by using public transit instead of driving.
- Health care: Retirees spend on average $7,030 a year on health care costs. They say that an ounce of prevention is worth a pound of cure—so focus on a healthy lifestyle to help keep your spending in check. Stay up to date on your preventive care; Medicare pays for many preventive services including a yearly wellness visit, plus many screenings and vaccinations. Also focus on eating a healthy diet, exercising and getting enough sleep.
Read up on these 6 healthy habits of super agers!
- Food: People aged 65 and older spend $6,490 on food each year, which is 12% of their spending. Reducing how much you eat out is an easy to way cut spending on food. Meal planning and ordering groceries online can help you avoid overspending and stretch your dollars and groceries further. Also be sure to take advantage of grocery coupons, sales and rebate programs. You could also try shopping in bulk or at discount stores.
Want more? Read our blog, How annuities help protect against inflation.
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