Why Social Security COLAs Can't Keep Up With Seniors' Soaring Costs

Social Security recipients rely on cost-of-living adjustments to help them make ends meet, but most say they're not nearly enough.

Jun 29, 2014 at 9:05AM

Social Security benefits are intended to help retirees make ends meet. But a recent study from the Senior Citizens League highlighted just how quickly the expenses that retirees have to pay outpace the annual growth of Social Security payments through cost-of-living increases, also known as COLAs.

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, takes a closer look at the study, describing how Social Security COLAs work to help benefits keep up with inflation. As Dan notes, the study says that almost all retirees face rising costs that dwarf their COLAs, with half having costs that rise at six times or more their COLA amount. Yet there's still debate about whether COLAs are too high or too low, with some arguing they should be even smaller in order to support the financial stability of the Social Security program. Health-care coverage is a key problem that senior citizens face, and even though the rate of increases in health-care costs has slowed lately, it still represents a huge risk. Dan concludes that it's important when making your initial Social Security benefits decision not to assume that COLAs will keep up with your expenses, and that can make it smarter not to claim earlier than you absolutely have to.

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Dan Caplinger and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

A Financial Plan on an Index Card

Keeping it simple.

Aug 7, 2015 at 11:26AM

Two years ago, University of Chicago professor Harold Pollack wrote his entire financial plan on an index card.

It blew up. People loved the idea. Financial advice is often intentionally complicated. Obscurity lets advisors charge higher fees. But the most important parts are painfully simple. Here's how Pollack put it:

The card came out of chat I had regarding what I view as the financial industry's basic dilemma: The best investment advice fits on an index card. A commenter asked for the actual index card. Although I was originally speaking in metaphor, I grabbed a pen and one of my daughter's note cards, scribbled this out in maybe three minutes, snapped a picture with my iPhone, and the rest was history.

More advisors and investors caught onto the idea and started writing their own financial plans on a single index card.

I love the exercise, because it makes you think about what's important and forces you to be succinct.

So, here's my index-card financial plan:


Everything else is details. 

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