Can Social Security keep pace with high inflation? Maybe not, but you can still fight back.

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Regardless of your age, you may wonder if Social Security will survive as long as you do. Recent reports indicate Social Security trust funds might be barreling toward insolvency by 2033.

But there’s a more immediate threat: While U.S. inflation remains high, Social Security’s annual cost-of-living adjustment (COLA) may not keep pace with rising prices. That leaves some retirees worrying that the 8.7% COLA for Social Security recipients in 2023 is not enough to offset steep hikes in the goods and services they buy.

In any given year, it’s hard to predict in January how the inflation rate will evolve over the next 12 months. Cost-of-living increases — the amount added to benefits for Social Security beneficiaries — typically are announced in the fall for the year ahead, making projections even trickier. For example, the retiree COLA calculation for 2024 will be set in October 2023. The calculation will be based on the Bureau of Labor Statistics release of the September 2023 consumer price index for urban wage earners and clerical workers (CPI-W).

If you receive Social Security payments, you may be concerned that these annual increases are simply not enough. High inflation, which boosts what you pay for food, utilities and other necessities, can squeeze your monthly budget.

Over the past three years, Social Security benefits have not kept up with inflation.

Recent trends are not encouraging. Over the past three years, Social Security benefits have not kept up with inflation, according to the Senior Citizens League. Even with annual COLA increases, its research shows that Social Security has fallen short by about $1,054 on average.

“This issue comes up with retirees,” said Beth Lee Lundberg, a certified financial planner in Tyngsboro, Mass. “They see how their benefits are affected by inflation. The threat to Social Security is an emotional issue and a financial issue.”

High inflation hits people on fixed incomes particularly hard. With about 40% of seniors relying solely on Social Security for their retirement income, inflation eats away at their purchasing power.

Lundberg tries to allay retirees’ fears of inflation’s impact. She may advise clients to buy Series I-bonds from that generally protect the value of cash (up to $10,000 per person, per year) against inflation.

Depending on their age, Lundberg may also suggest that they buy more stocks. “If their money has 20 more years to grow, they may be able to take more risk on the equity side,” she said. Some advisers recommend annuities as a way to offset the volatility that comes with owning more stock, and steady annuity payments can provide a hedge against inflation.

When older folks fret that COLA increases aren’t enough, advisers might address their concern by putting the situation in context. Beau Henderson, an adviser in Gainesville, Ga., reminds clients that Social Security was never designed for its current role.

“In the 1930s, it was set up to help old-age people to not be indigent,” he said. “Today, it’s the primary source of retirement income for many people — and they’re drawing on it for 20 or 30 years.”

The retirement age has barely budged since 1935 (it was 65 then; today, you qualify for full retirement benefits at 66 or 67, depending on your birth year). Plus, people on average live much longer. This puts Social Security under strain.

“With a higher COLA, the Social Security system would be more unstable over the long term,” Henderson said. He urges anxious retirees to focus on what they can control: household expenses. Track your cash flow, identify which nondiscretionary purchases soar the most, and seek to offset those increases by cutting other costs.

“High expenses and high inflation in retirement, with moderate or low assets, is the death knell,” Henderson said. “Keeping your expenses as low as possible helps fight high inflation.”

More: Social Security is in trouble — how would you fix it?

Plus: You may have overpaid your Social Security taxes thanks to the Great Resignation

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