Millions of older Americans today receive a monthly benefit from Social Security. If you recently signed up to start taking benefits, you may be appreciative of the extra income.
But if you’re new to Social Security, it’s important to know what to expect. Here are a few aspects of the program you should be aware of.
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Understanding Cost-of-Living Adjustments (COLAs)
Let’s imagine you just signed up for Social Security and are receiving $1,800 a month. That check may be helping you cover the bills for now, but thanks to inflation, in a decade, you may not get $1,800 worth of buying power out of it.
Annual COLAs are based on recent inflation data, so your Social Security benefits may increase by varying amounts each year, potentially helping you combat the effects of rising prices over time.
Working Alongside Benefits and the Earnings-Test Limit
Social Security allows recipients to work and earn money from a job while receiving monthly benefits. However, exceeding the earnings-test limit could lead to withheld benefits until full retirement age (FRA) is reached. Knowing this limit can help you avoid any negative impacts on your benefits.
Preparing for Potential Benefit Cuts
Social Security’s financial challenges may result in benefit reductions in the future, with trust funds projected to be depleted by 2034. Being mindful of these potential cuts early on and managing your living costs prudently can help you secure your financial stability. Consider saving a portion of your benefits and exploring part-time work opportunities to bolster your financial resilience.
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