Changes to Social Security benefits may affect retirees' finances in profound ways. Retirees are likely to see such a change. Seniors will find that their benefits will go up one of the biggest increases in more than four decades.
The reason Social Security benefits are changing is explained here.
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Social Security checks will go up next year. A senior who received an average benefit of $1,661 last year could see a hike of as much as 142.8%.
This is a big increase in benefits compared to the last forty years. You can see how large the discrepancy is by looking at the chart below.
The Social Security.gov has an image.
The 8.6% benefits increase retirees could see next year will be a huge departure from the increase most current recipients have seen for the majority of their retirement years. The average annual benefits increase was 2.29%. It would be the highest jump in 33 years.
Seniors are not getting a huge benefits increase just to be generous. Inflation has hit a 40-year record and the formula used to determine COLAs is designed to ensure benefits keep pace with inflation. Benefit increases are dramatic when prices go up quickly.
Unusually high demand for goods and services combined with supply constraints due to the war in Ukraine and the Pandemic are some of the possible causes of inflation. Every senior should be aware that their big Social Security increase is the result of economic conditions that could have a far-reaching impact.
Since prices have gone up so much, a bigger check won't give retirees more buying power but will try to ensure their Social Security benefits continue to allow them to purchase the same level of goods and services as when prices were low. If inflation continues to increase after the COLA is calculated, then the benefits increase may not happen.
The reason for the benefits increase is what recipients need to prepare for. You need to change your spending and investing strategies when inflation is high.
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