Social security receives an increase next year. Here's what it means for the average recipient – The Fool Motley

Although social security plays a vital role in helping older people pay their bills, many retirees continue to struggle to keep up. Most older people will be happy to learn that social security is about to increase significantly. The cost of living adjustment, or COLA, for 2019 will be set at 2.8%.

This translates to about $ 40 more per month for the average beneficiary. And although it's certainly better than nothing, it's not a sum that will change the lives of those who are already struggling.

Gaps in social security

There is a common misconception about social security that these monthly benefits alone are enough to support the elderly. The reality, however, is that social security will only replace about 40% of the typical worker's early retirement income. For employees above the average, it will replace an even lower percentage. Most seniors, on the other hand, need about 80% of their previous earnings to maintain a relatively comfortable retirement lifestyle. Therefore, these benefits are not enough.

SOURCE OF IMAGE: GETTY IMAGES.

In addition, although the next COLA is the most generous in recent years, COLAs, in general, are struggling to keep pace with inflation, although they have been introduced with the primary purpose in mind. to help the elderly. keep pace. In fact, since 2000, recipients of social security have lost 34% of their purchasing power, reports the Senior Citizens League. Therefore, while it is encouraging to see a significant COLA in 2019, those who rely on social security for the bulk of their income should actively take steps to better manage their finances rather than expect to receive $ 40 more per month.

Give yourself an increase

Although an extra $ 480 a year is not meaningless, this is not enough to make the difference between struggling financially and living a life without financial worries. If you prefer to get closer to the latter, take steps to give yourself an increase.

First, look carefully at your budget and find ways to reduce expenses that you really can not afford. This could mean selling your home if it is expensive to maintain, reduce the size of your rental housing or move to a cheaper part of the country where your benefits will go further. It could also involve a series of smaller changes, such as reducing restaurant meals, getting a cheaper cable package, or canceling a gym membership that you rarely use. It is very likely that all these changes will bring you over $ 40 a month.

Then, consider working in a certain capacity. Retirement is actually a good time to start a business. If you're not interested in storing shelves at the local grocery store to make money, do something you like.

A relatively large increase in social security is certainly not a mockery. At the same time, do not use this incoming boost as an excuse do not take financial matters in your own hands. It is likely that you have the opportunity to make lifestyle changes that will work great for your bank account, regardless of the extra money that Social Security will give you next year.