Austin Drake, CFP®
Americans receiving social security benefits will see the largest increase in payments in 40 years. Due to significant inflation during the pandemic in 2020, next year’s cost-of-living adjustment (COLA), will be 5.9%, per the Social Security Administration. However, inflation can still be a challenging headwind for some retirees who have pensions with no COLA. We seek to add sources of inflation hedges in our portfolios in high inflation periods.
Providing Context Around "Benefits Will Be Cut" Headlines
After the Social Security Trustees annual report was released last month, many media sites were quick to publish their click bait headlines as social security could run short on money for benefits in 2034. This does not guarantee that benefits will be cut however. It does certainly mean that the social security program needs to be shored up. This will likely be addressed by congress and discussed in run ups to elections closer to that deadline, per the government norm. It is important to note that while there is stabilizing to do, social security benefits are expected to be at least 74% funded through 2095.
While this isn't ideal and the program certainly has its flaws, we would be surprised to see any government role candidate run on a policy that allows social security benefits to be cut.
Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.