After years of struggling with paltry or nonexistent cost-of-living adjustments (COLAs), seniors who collect Social Security finally get a dose of good news: Benefits are increasing by 2.8% next year, which, for the average individual recipient, translates into an additional $39 per month, or $468 per year. Households in which both members collect Social Security stand to benefit even more from this much-needed boost.

But before you make plans to spend that extra money, think about your financial picture. Are you managing well with your bills, or are you struggling to make ends meet? If the latter sounds more like you than the former, here are a few ways you might consider putting next year's Social Security raise to good use.

Bearded older man with big smile.


1. Pad your emergency savings

Just because you're retired doesn't mean you don't need an emergency fund for protection against life's unplanned expenses. If you're getting a boost next year from Social Security and don't have much money in the bank, you'd be wise to stick that extra cash into a savings account so that it's there for you when you need it. This especially holds true if you have brewing health issues that might cost you more money in the not-so-distant future.

And if you're thinking, "Well, I'll just tap my nest egg if I need money in a pinch," think again. Yes, you can and should rely on your savings to pay your expenses. At the same time, what happens if the market takes a dive at the precise moment you need cash in an instant? Suddenly you'll have no choice but to take a financial loss later in life, and all because you couldn't wait to access that money. And there lies the importance of keeping some cash (ideally, at least three months' worth of living expenses) in the bank -- because you don't risk losing principal based on market conditions.

2. Invest your extra cash

If you need your COLA to help cover your immediate bills or pad your savings account, then by all means, use it for those purposes. If not, consider putting it into an investment account and growing it into a larger sum.

Retirees are often told to be wary of stocks because they're so volatile in nature. But if your investment account doesn't consist of money you expect to need immediately, you can put some cash into stocks and see how things play out. Since the market tends to perform well in the long run, investing even a modest amount and growing it during retirement could leave you with a more solid cushion later in life.

3. Tackle pressing repairs

When you're on a fixed income, it's natural to put off things like automobile maintenance and home repairs. But the longer you neglect those items, the more expensive they might get later on. Now that you have a little extra cash coming your way courtesy of the Social Security Administration, make a point to address some of the small but important upkeep and repair items you've been meaning to tackle. Doing so might save you a headache down the line.

Of course, these are just a few of the ways you might maximize next year's Social Security raise. No matter what you decide to do with that money, remember this: Your upcoming increase will be the most generous one in years, and we don't know what the next bunch of COLAs will look like, so you might as well make the most of that money while you can.