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Social Security benefits will rise by the biggest surge in decades in 2023 as Americans deal with high inflation. (iStock)
Millions of Social Security beneficiaries will see a significant increase in benefits from January 2023, but inflation could eat most of them out, experts say.
“There’s a reason why salaries are going up,” said Christian Mills, head of financial advisors and relations at Reverse Mortgage Funding. “Because everything has become much more expensive and inflation has gone up. There is a big trade-off.”
The recent increase in the Cost of Living Adjustment (COLA), which boosts the average monthly wage by $140, would be the largest surge in Social Security benefits in 40 years. However, it is unclear whether inflation will slow down anytime soon.
Inflation rose 8.2% year-on-year in September, according to the Bureau of Labor Statistics (BLS). In particular, household food and energy prices rose by 13% and 19.8% respectively.
In addition to record inflation, Americans are also plagued with heavy debt. Household debt rose to $16.15 trillion in the second quarter of 2022, according to the Federal Reserve Bank of New York. His credit card balance alone increased by $46 billion, bringing him nearly $1 trillion in total, the biggest surge in over 20 years.
To combat inflation, the Federal Reserve has been raising interest rates and may continue to do so through 2023. This monetary policy could affect Americans’ outstanding debt as interest rates on various credit products rise.
If high-interest debt is getting in the way of your retirement savings, you may want to consider a personal loan to pay it off at a lower interest rate. At Credible, you can consult a personal loan expert to see if this option is right for you.
Financial expert: Government-led inflation is killing retirees
How to maximize social security benefits
Social Security beneficiaries can start collecting at age 62, but can wait until age 70 to significantly increase their benefits.
“If you wait until you’re 70 after full retirement, you’ll get about an 8% pay raise each year,” Mills said.
Social Security is designed to replace part of your pre-retirement income. The amount you receive depends on factors such as the date you start collecting payments and your earnings level.
The age of full retirement recognized by the Social Security Administration (SSA) depends on the year you were born.
Full retirement age is 66 for those born between 1943 and 1954. However, for those born after 1955, he is slightly raised to 67. SSA Releases Retirement Planner Chart.
However, it can be difficult to delay receiving Social Security benefits. especially when the economy is uncertain, expensive medical expenses and potential outstanding debt.
If you want to pay off your debt before retirement, consider taking out a low-interest personal loan to save on your monthly payments.marketplace like Credible helps you compare different loans and interest rates without hurting your credit score.
Many Americans plan to withdraw Social Security benefits before age 70, leaving money on table: survey
Should I Use Home Equity to Delay Social Security Collections?
Homeowners paying off their mortgage may benefit from options such as Home Equity Lines of Credit (HELOC), Reverse Mortgages and Cash Out Refinancing.
A cash out refinance allows homeowners to replace their current mortgage with a new, larger loan. You will then receive cash for the difference between the new loan amount and the original loan balance.
Homeowners can use this cash for financial planning options. This includes paying off high-interest debt that may have prompted you to consider taking Social Security benefits early.
However, the Consumer Financial Protection Bureau (CFPB) generally advises against using some home equity options just to delay receiving Social Security benefits. This is because the overall cost of home equity options can exceed the maximum Social Security benefits.
If you’re interested in leveraging your home equity to pay off your outstanding debt, talk to a Credible loan expert to see if a cash out refinance is the right option for you.
2022 Home Equity Loan and HELOC Requirements
Have a financial question and don’t know who to ask? Send an email to Credible Money Expert (moneyexpert@credible.com). Your questions may be answered by Credible in the Money Expert column.
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