What's Happening
2 hours ago

Mark Cuban's Million-Dollar Advice To Teens: 'If I Were 16 Again, I'd Start This Lucrative Side Hustle'

benzingabenzinga.com
2 hours ago

If You Invested $1,000 In Apple A Decade Ago, Here's How Much You'd Have Now

benzingabenzinga.com
2 hours ago

Bill Gates Surprised By Lack of Interest In These Essential But 'Boring' Topics

benzingabenzinga.com
2 hours ago

Trump Sues CBS For $10B, Says Harris Interview Intended To 'Mislead The Public'

benzingabenzinga.com
2 hours ago

Bitcoin price falls, forward volatility jumps as traders brace for election: Analyst

theblocktheblock.co
3 hours ago

Trump Slams Cuban Over 'Strong Women' Remarks: 'He's Weak Physically And Mentally'

benzingabenzinga.com
3 hours ago

FCC Commissioner: Harris 'SNL' Cameo Violated Equal Time Rule

benzingabenzinga.com
3 hours ago

Elon Musk's Mother Suggests She May 'Vote Ten Times' – Or More

benzingabenzinga.com
4 hours ago

Mary Trump On Trump's Lack Of Empathy: 'Why Is It That The More Awful Things Donald Does, The Less It Seems To Matter?'

benzingabenzinga.com
4 hours ago

EV Maker Nio Marks Battery Swap Network Milestone, Rumors Swirl Around 2nd Onvo Electric SUV

benzingabenzinga.com
4 hours ago

Iran Flexes Nuclear Muscle, Threatens US With 'Tooth-Breaking' Retaliation

benzingabenzinga.com
4 hours ago

Crypto casino Metawin loses $4 million to exploit of Ethereum, Solana hot wallets

theblocktheblock.co
5 hours ago

Analyst Says This Crypto Could Explode By Up To 3.765%, And It Is Not Bitcoin Or Solana

benzingabenzinga.com
5 hours ago

Google Delivers New AI Features To Maps, Google Earth, Waze Apps

benzingabenzinga.com
5 hours ago

Are You Richer Or Poorer Than Your Peers? Here's A Look At The Average Net Worth For Your Income

benzingabenzinga.com
6 hours ago

Warren Buffett Made His Fortune 'Sort Of By Accident,' According To His Daughter. Loving What He Did Led To Unexpected Wealth

benzingabenzinga.com
6 hours ago

Haley Tells Pennsylvania Voters To Put Emotion Aside And Rally Behind Trump

benzingabenzinga.com
6 hours ago

Temperature roller coaster on tap for the Northeast, with drought to continue

accuweatheraccuweather.com
7 hours ago

Here Are the 3 Big Differences Between Costco and Sam’s Club

retireretire.ly
7 hours ago

When Elon Musk Sold His First Company, He Had A Choice: A House Or A McLaren F1. Here's How His Choice Ties Into The Elusive Tesla Roadster

benzingabenzinga.com

Low Social Security Benefits Might Force Some Retirees Back to Work. Here’s How to Avoid That Possibility.

Social Security is an important part of millions of Americans’ retirement plans and finances. For some, Social Security is a “nice-to-have” income source. For others, it’s a large part or all of their retirement income.

Unfortunately for those who fall into the latter category, Social Security is beginning to lag behind the increasing cost of living in the country, causing some people to consider returning to the workforce.

If you’re in your golden years and decide to return to the workforce, it should be because you want to, not because your financial situation forced you. However, life happens, and sometimes, it’s inevitable.

Two people sitting on a couch holding books while one person looks at the camera.

Image source: Getty Images.

The Social Security COLA is appreciated, but it’s just not enough

To help offset the effects of inflation, Social Security provides an annual cost-of-living adjustment (COLA). In an ideal world, this annual COLA would cancel out inflation, but that’s just not the case for many people.

The COLA beginning in 2025 will be 2.5%, the lowest since 2021 and below the 3.75% average since COLAs became an annual occurrence in 1975. According to a recent Motley Fool survey, 54% of retirees believe the new COLA is insufficient, and around half are considering returning to work because of low Social Security benefits.

For perspective on what recipients are working with here, below are the current average monthly benefits at ages 62 to 70 (the range of ages you can claim Social Security), and what those averages look like when you account for the COLA.

Age Current Average Monthly Benefit Average Monthly Benefit With COLA
62 $1,274 $1,305
63 $1,365 $1,399
64 $1,411 $1,446
65 $1,504 $1,541
66 $1,719 $1,761
67 $1,844 $1,890
68 $1,848 $1,894
69 $1,818 $1,863
70 $1,963 $2,012

Data source: Social Security Administration. Benefit amounts are rounded down to the nearest dollar. Table by author.

The COLA-adjusted average benefits aren’t definitive and will change based on new claimers and other population changes, but they shine a light on how modest and limiting the COLA is for some retirees.

Delay claiming Social Security as long as possible if you can

The most direct way to guarantee a higher Social Security monthly benefit is to delay claiming benefits as late as possible. Your full retirement age is when you’re eligible to receive your baseline monthly benefit (called the primary insurance amount), but you can claim before or after that age.

Here are full retirement ages based on your birth year.

Chart showing Social Security full retirement ages by birth year.

Data source: The Motley Fool.

If you decide to delay benefits past your full retirement age, the monthly benefit is increased by two-thirds of 1% each month, or 8% annually, until you reach age 70. If your full retirement age is 67 and you delay benefits until 70, you can expect a roughly 24% increase in your monthly benefits.

For some, waiting until 70 isn’t realistic because they need the benefits for their livelihood in retirement. That’s understandable. But if you’re able to survive from other income sources, it’s worth considering the delay to lock in a higher monthly benefit.

Attack retirement savings from multiple angles

The best way to offset low Social Security benefits is to be proactive and ensure you have multiple retirement income streams. It’s easier said than done, but it’s crucial to make sure you’re not fully reliant on Social Security.

A 401(k) is the most popular non-Social Security stream of income in retirement, but those are only offered through employers, so not everyone has access to one. IRAs, on the other hand, can be opened with relative ease by anyone.

There are two main types of IRAs — traditional and Roth — and each has a unique benefit and tax break. Contributions to a traditional IRA are potentially tax-deductible in the year you make them, but you must pay taxes on money withdrawn in retirement. Roth IRA contributions aren’t tax-deductible, but you can take tax-free withdrawals in retirement.

In an ideal world, you’d go into retirement with money in retirement accounts and investments in a brokerage account, and Social Security would be supplemental income. Again, it’s much easier said than done but feasible.

Even if you don’t think you have much to contribute to a retirement or brokerage account, don’t underestimate the power of small, consistent investments. The compounding effect rewards people for their consistency and willingness to start stashing money aside early.

The $22,924 Social Security bonus most retirees completely overlook

If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $22,924 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after. Simply click here to discover how to learn more about these strategies.

View the “Social Security secrets” »

The Motley Fool has a disclosure policy.

Related Posts

Image source: Upsplash/The Motley Fool Costco and Sam’s Club are two popular warehouse club retailers. Many shoppers join warehouse clubs to shop members-only deals to

Image source: Getty Images Unexpected car troubles are always stressful. It’s harder to get around while your car’s in the shop, and you may be

Image source: Upsplash/The Motley Fool Many people have fitness and health goals. Whether you want to get into better shape, be more active, or lose

Image source: Getty Images Whether you’ve switched jobs or just want more control over your investments, most of us have faced rolling over an old