You may be aware that Social Security benefits grow over time thanks to annual cost-of-living adjustments. But are these yearly increases enough to keep up with inflation?
It's a matter of debate. For perspective, the average monthly Social Security payment back in 1995 was $720. It has since grown to $1,976 per month, a 3.4% annualized growth rate, which more or less aligns with the Department of Labor Statistics' official inflation figures for the period. In fact, it slightly outpaces overall consumer price increases over those 30 years.
Whether it's 1975 or 2025, neither amount represents a great deal of money, underscoring the Social Security Administration's regularly delivered message that the benefits program isn't intended to make up the entirety of one's retirement income. The agency reports its monthly payments account for an average of 40% of the typical retiree's income.
How to boost your benefits
For those who haven't yet begun receiving benefits, there are a few things you can consider doing to raise your eventual payments.
Thought you claim once you turn 62, delaying will boost your benefits. Indeed, waiting until 70 would result in a monthly check that's nearly 80% bigger than what you're eligible to receive claiming at 62.
Since the Social Security Administration factors your 35 highest-earning years into its calculation of your benefit, simply continuing to work can also increase your benefit amount if you're earning more now than you did earlier in your career, or if you don't have 35 years of work history.
While these strategies can help, remember Social Security still won't be enough to fund the sort of retirement most people dream of. Data from the Bureau of Labor Statistics indicates that as of 2023, the average retiree's household was spending on the order of $5,000 per month on ordinary living expenses. That means you should be saving for retirement on your own.
Individual retirement accounts (IRAs) remain a popular, tax-advantaged way to do so.
