Social Security’s Record 2023 Increase Isn’t All It’s Cracked Up to Be


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Retirees feeling crushed by the highest inflation in decades are getting some relief. The Social Security Administration has announced that benefits will receive an 8.7% cost-of-living adjustment (COLA), the highest bump since 1982. In pure dollar terms for the average Social Security recipient, it’ll be the largest COLA on record. Don’t get me wrong, this is a great thing — many retirees need every extra dollar they can get.

But look past the headline number, and you’ll see that it doesn’t change the financial position many retirees find themselves in already. In this annual COLA review, I’ll guide struggling retirees and those preparing to enter their golden years.

Image source: Getty Images.

The math behind Social Security falls apart rather quickly

This year’s COLA is a step up from last year’s 5.9%. I wrote about it then and illustrated how some basic living expenses could quickly eat up a retiree’s benefits. You might be wondering how much Social Security can cover once you revisit how high living expenses are these days. As a reminder, the average retired Social Security recipient receives $1,669 per month in benefits.

According to Statista, the average rent in the United States in 2022 is $1,295 per month. That’s increased by 17% from the $1,100 it was the prior year! Not only is that rise far more than what this year’s COLA will cover, but for those who depend entirely on their benefits, that’s 77% of their income. That’s not even factoring in a laundry list of other living costs like utilities, medical care, and groceries. 

Most living expenses are going up, not down, which makes Social Security much more of a financial crutch than the safety net many think it is. But don’t let that get you down. Realizing this truth is the first step to a brighter financial future and adding some shine to those golden years. Here are some tips for navigating retirement.

1. Clearing a low bar

Many don’t notice how low of a financial bar Social Security is. The average retiree’s benefits total $20,028 annually. That’s the equivalent of working a full-time job at $9.63 per hour. For those able to work, simply adding income to your life is the most effective and quickest medicine. The great thing is that clearing a low bar means you can make a huge difference in your financials with relatively little output.

The minimum wage in the United States is $7.25 per hour, but most jobs pay more these days. The average hourly wage for an entry-level job is $16, and many significant corporations will start at $10 to $12 per hour. You can greet shoppers at your local retailer a few nights a week and possibly add thousands to your annual income. Remember, Social Security retirees can keep their benefits with no income limit once they reach full retirement age.

2. Consider a transition versus hard retirement

Retirement doesn’t have to be an all-or-nothing proposition. Don’t forget that whatever your career is, you likely have decades of experience and knowledge. Are you in sales? Consider winding down your client base to a manageable group of high-value clients. Are you an expert on a topic? Consider consulting, which can generate high income for fewer hours than a typical nine-to-five job.

Some people view retirement age as a cliff that’s rapidly approaching. But life is about perspective, and you still have options if you’re financially unprepared for full retirement in your older years. Creating income is very doable as you scale back your career; it just might not be in the day-in, day-out style of grind you’re used to. But taking this path can make Social Security the crutch it’s supposed to be, instead of what puts your food on the table.

3. Put your money to work

Investing is a critical component of any retirement strategy. Leaving your wealth all in cash is asking inflation to eat away your purchasing power. Of course, you don’t want to take much risk in your later years. Consider investments that will diversify your portfolio, like index funds, or those that generate passive income, like dividend stocks and bonds. It’s never too late to get started, and putting extra capital to work while you can will make your later years easier.

Retirement is a unique experience for everyone, one that depends on your individual decisions and circumstances throughout life. But you can continually improve your situation, even if you’re not working with the best hand.

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