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For many retirees living on a fixed income, rapid price increases (1) in the post-pandemic era have been hard to absorb. In fact, as inflation has surged, older generations have seen their spending growth lag behind other generations (2), and their discretionary spending has fallen below that of households overall.
This could soon change, though. As Bank of America (1) reported, the One Big Beautiful Bill Act (3) already provided a temporary income boost for many retirees, as eligible seniors 65 and over can claim a new tax deduction of up to $6,000 per taxpayer through 2028. A lower tax bill means more money to spend on other things.
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Now, a coming Social Security change in 2027 could provide even more relief through a cost-of-living adjustment, or COLA. The COLA was announced in October and will take effect in January, resulting in a 3.6% benefit increase for all Social Security recipients.
COLAs happen most years, but some groups feel they aren’t as effective as they should be at maintaining the buying power of Social Security. While COLAs are calculated using a consumer price index to try to ensure benefits keep pace with inflation, the Senior Citizens League believes the formula is flawed, and the real buying power of benefits has declined by almost 14% since 2016 (4).
But this year, the Bank of America Institute said that the recently announced 3.6% increase could actually provide a “meaningful boost” in 2027. Because the COLA is relatively high (tied for the fifth highest (5) since the 80s), if inflation ends up moderating as experts anticipate, the increase in benefits may actually outpace the growth in prices.
In other words, the 3.6% benefit bump may not just help seniors avoid losing ground. It could help them actually gain ground, increase their purchasing power, and potentially narrow their spending gap.
This should come as a welcome relief to older Americans, as if the prediction pans out, the extra wiggle room in their budget next year could allow them to make purchases they’ve been putting off.
Of course, even a big Social Security raise doesn’t mean Social Security is sufficient to cover every retiree’s spending needs. Social Security is meant to work with savings to support seniors, so older Americans should invest wisely and have a solid financial plan for their later years.
Here are a few things seniors can do to help achieve the security they deserve.
Build the right portfolio
Retirees who need investment income should build a diversified portfolio that includes investments that hedge against inflation.
A gold IRA is a great way to do that. Goldco offers the opportunity to invest in gold and other precious metals in physical form, while still taking advantage of the substantial tax benefits an IRA can offer.
Goldco offers free shipping and access to a library of retirement resources, and the minimum purchase is just $10,000. Plus, the company matches up to 10% of qualified purchases in free silver to help jumpstart your investing effort.
If you think this may be the right investment for you to add to your portfolio, you can download your free gold and silver information guide today.
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Take advantage of senior discounts
Although the 3.6% COLA may give seniors more buying power this year, the reality is that every dollar still matters. That’s why retirees may want to consider joining senior-focused organizations like AARP to gain access to savings opportunities.
AARP offers a wide array of discounts on everything from travel to insurance to entertainment to prescription dental plans. Members can also get the help and support they need to make informed choices about their finances and make their money stretch further.
In fact, AARP members get access to numerous guides that can help you make the most of Social Security, choose the right Medicare plan and uncover other government benefits — potentially saving you thousands.
Sign up with AARP today and get 25% off your first year.
Get help with a financial plan
A financial advisor can help crunch the numbers and build a plan that works. But hiring an advisor can be a major commitment that can make or break your retirement. That’s why finding a reliable professional is critical.
That’s where Advisor.com can come in. Advisor.com vets advisors based on their track record, regulatory background, and client ratios. You just need to answer a few simple questions about your finances and goals to match with a professional who’d be a good fit for you.
The network includes fiduciaries with a legal obligation to act in your best interests, and Advisor.com uses an AI-powered matching tool to connect you with a qualified expert who helps you with your unique financial goals.
Since you need to make sure you’re a good match, Advisor.com lets you set up a free initial consultation, with no obligation to hire. And once you’ve found the right fit, you’ll get the support you need to make a comprehensive retirement plan, so you’re ready to enjoy life even if Social Security’s COLA underperforms in some years.
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Article Sources
We rely only on vetted sources and credible third-party reporting. For details, see our ethics and guidelines.
Trading Economics (1); Bank of America Institute (2); Congress.gov (3); Seniors League (4); Social Security Administration (5)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
