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How will you spend your Social Security “raise” in 2023?

Your dream of a relaxing retirement could fade over time if prices rise but the amount of your future income remains the same. That is why it is essential to ensure that your incoming cash flow goes up in the future.

If you are (or you will be) eligible for Social Security retirement benefits, there is a cost of living adjustment attached to these that can increase the dollar amount you receive every year, but these Social Security “raises” are not guaranteed. However, if or when you receive one – especially a significant increase like the one that is anticipated for 2023 – it could make a big difference in your lifestyle and your life.

Social Security Cost of Living Adjustments

While Social Security cost of living increases are not guaranteed, these added benefit dollars can be extremely beneficial. Although COLAs may not be implemented every year, over the past 47 years, the increase has ranged from 0% to 14.3%.

Social Security Cost-of-Living Adjustments from 1975 to 2021

YearCOLAYearCOLAYearCOLA
19758.019913.720072.3
19766.419923.020085.8
19775.919932.320090.0
19786.519942.820100.0
19799.919952.620113.6
198014.319962.920121.7
198111.219972.120131.5
19827.419981.320141.7
19833.519992.520150.0
19843.520003.520160.3
19853.120012.620172.0
19861.320021.420182.8
19874.220032.120191.6
19884.020042.720201.3
19894.720054.120215.9
19905.420063.32022 (est)10.5

Source: Social Security Administration

There was a 5.9% COLA for Social Security recipients in 2022. Going forward into 2023, it is estimated that Social Security recipients will receive a cost-of-living adjustment of 10.5%. But are these Social Security “raises” really enough to keep up your future purchasing power?

While some people believe these raises are beneficial, they may not be as significant as you might think. For example, the Social Security COLA 2023 estimate is 10.5%. However, with inflation at over 9% – versus just 1.4% in 2020 – the actual rise in income isn’t very much.

With that in mind, even with higher monthly Social Security checks, retirees may still not be able to maintain a comfortable lifestyle. This is particularly true if other expenses, such as healthcare and long-term care services – are added into their outgoing budget.

How to Fill in Retirement Income “Gaps”

Even with a nice raise from Social Security, there could still be a “gap” between the amount of retirement income you generate compared to the amount of your living expenses. How can you fill that in without having to drastically change your lifestyle?

One option could be to purchase a fixed indexed annuity (FIA) that includes an increasing income rider. With many of today’s annuities, the income riders offer a guaranteed amount of income for life.

Because FIAs are a type of fixed annuity, the amount of income that you generate going forward will not decrease – even if there is a substantial market downturn that causes the underlying index(es) to perform in the negative.

Does It Make Sense for You to Combine Social Security and Annuity Income in Retirement?

There are many “moving parts” that go into fixed-indexed annuities. Because of that, it is recommended that you talk with a retirement income specialist before you make a commitment to a fixed indexed – or any – annuity.

At Annuity Gator, our goal is to educate consumers (and financial professionals) on annuities, how they work, and how they could be used in conjunction with other savings and retirement income sources.

So, if you would like to set up a time to chat with a retirement income professional, please feel free to reach out to us at (888) 440-2468 or you can send us an email via our secure online contact form. We look forward to hearing from you.

How will you spend your Social Security “raise” in 2023?

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