Earlier this month, the government announced that there would be no Cost-of-Living Adjustment (COLA) increase for Social Security in 2016. Should retirees be concerned about not getting more money next year? This was the topic of discussion in a recent USA Today article.
I hope news like this is not startling to you or your lifestyle in retirement. Unfortunately, in this economy, these low COLA adjustments are becoming the norm for retirees. This is the 3rd time in the last 7 years that the COLA will be 0% and the average over that period is just 1.21%. This can definitely be a strain on the budget over time. While the Consumer Price Index used to calculate the COLA is at 0%, things like food, shelter and medical care are continuing to increase.
So what are you to do? Most people don’t envision their retirement being a constant worry about expenses and reduction in lifestyle. They hope that they’ve planned and saved enough to endure these sluggish economic times. The average older American gets 34% of their income from Social Security, which means 66% comes from other sources. How are your other sources of retirement income going to react and assist in maintaining your lifestyle?
Have you created a financial plan that is able to withstand 0% growth? If you don’t know, it’s time figure it out.