A Bigger Social Security Raise in 2027? Here’s Why That Might Not Be Good News

TPIR Ep 132 Full Show.mp3: Audio automatically transcribed by Sonix

TPIR Ep 132 Full Show.mp3: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Speaker 1:
Hey, Matt. Hey, Josh. I have what sounds like great news. I'm on the edge of my seat. So early estimates are saying Social Security recipients could get almost a 4% raise next year. That sounds fantastic. So here's my question. Why have I heard financial people saying that maybe that actually is not going to be a good news after all? Well, because, uh, it's might not be, um, you know, that usually means that something else is happening behind the scenes. You know, if Social Security checks are getting significantly larger, it's usually because everything else you're buying is getting more expensive too. And so we've seen that happen this year, right? So today we're going to actually explain that very thing. It's called the Cola. And it's not something that you drink but we'll talk about it. Uh, and you know why bigger isn't always better when it comes to the cola. What happens with LGBTQ plus retirees. What you need to know And really what everyone hearing my voice or seeing our lovely faces should keep in mind.

Speaker 2:
Welcome to Take Pride in Retirement, the podcast dedicated to helping members of the Lgbtq+ community protect and grow their hard earned money. Get set for a show full of education and insights with your host and advisor, Matt McClure. We recognize every family is unique. The goal of the show is to help you achieve financial freedom, so you and your loved ones can have the retirement you've always dreamed of, a retirement you can take pride in. No matter who you are, where you're from, or who you love. So now let's start the show. Here's Matt McClure.

Speaker 1:
Well hello there. Once again, welcome to another edition of Take Pride in Retirement. Matt McClure here with you, your host, your advisor, your friend, your pal and your confidant. And I am Josh Rhett Noble, the attache to the advisor, aka co-host, aka Matt's husband. Yes, he is indeed. All of those things wears many hats, and I appreciate him joining me on the show, and we appreciate you joining us on the show as well as today, we talk about the projected Social Security cost of living adjustment or Cola for 2027, why the headlines don't tell you the whole story, and how to make sure inflation does not derail your retirement, because it certainly can. First things first, though, I want to encourage you. If you are watching or listening to like and subscribe, subscribe. Yes, the beautiful dulcet tones of Mr. Josh retinol, everybody. Um, please do that though it really does help. The algorithm helps us spread the word, helps you help us, and so we can continue to help you so that that would be good. If you get anything out of these videos and out of these, um, shows, episodes, podcast episodes really would appreciate you helping us spread the word.

Speaker 1:
Leave a comment, leave a nice review. I really would appreciate that. I always say like, you know, if you love us, tell your friends, if you don't love us, tell your enemies whatever you need to do to keep spreading the word about take pride in retirement, love to do that. Love to see those numbers continue to go up. And also, I would also like to say to you, you can reach out, if anything that we talk about on the show today sort of piques your interest, makes your ears perk up a little bit and say, wait, I've got a question about that. Or maybe my situation might be a little bit different than what they're talking about. Feel free. Reach out. Take pride in retirement.com is the website. You can schedule a free consultation there. And of course, it's free of any cost. As I just said, it's also free of any obligation. You're free to take the information I give you and go do whatever you want with it. So that is that and that is our housekeeping for the day.

Speaker 2:
Um, all right. So first things.

Speaker 1:
First. Now what?

Speaker 2:
What are people talking about?

Speaker 1:
Yeah. Now here's the thing. So this happens once a year, Uh. Every fall, Social Security announces a cost of living adjustment or that if you, you know, are into acronyms at all, COLA that's Cola, as we call it in the biz. And so it's designed to help benefits keep pace with inflation. Here's the thing. Some years we get a zero cost of living adjustment. If inflation has been super low, right. Or if there's been deflation, if inflation has gone the other way. Um, but most years we see a cost of living adjustment. Now early estimates that we're seeing senior citizens League, I believe was out with some some numbers not long ago projecting as of right now, as of the data that we're seeing, the early estimates saying that next year's increase could land somewhere around 3.8 to 3.9%. Now, that is quite a bit larger than last year's 2.8%. So for somebody receiving, say, the average retirement benefit that could mean about somewhere right around 80 bucks more each month.

Speaker 3:
Okay, well, that sounds like you should be excited about it. We're not supposed to be.

Speaker 1:
Yeah. No, I mean, you can. You sure you can be excited about it? Absolutely. But maybe temper your your expectations, temper your excitement just a little bit. Because number one, it's a projection, right? The increase isn't finalized. It'll be October. Um, and after inflation data from these next three months, so July, August and September, they got to get those numbers and then they'll be able to, uh, make that official announcement of what next year's Cola is going to be. So that's what is going to happen. And today we're talking about projections and not just guarantees of what's going to happen. You know, the only guarantees that we have in life, the only sure things are death and taxes and not what the Social Security Administration is going to do next year. But we do have history to tell us what has happened, right? And so looking back to 2020, you know, you can see, uh, 2020, we got 1.6% increase was 1.3% in 2021. Then a little thing called, uh, you know, the pandemic was happening during that time. And, you know, supply chains just ground to a halt for long periods of time. And it took some time for those effects, those ripple effects to make their way through the economy.

Speaker 1:
And so you see in 2022, almost a 6% Cola, just shy of that, and then an 8.7% cost of living adjustment in 2023. Then after that, in 24 and 25 and 26, it came back down to earth a bit. But, uh, it was a big cost of living adjustment. And that increases the benefit amount, right? If you are already collecting benefits after 62, the Cola actually adjusts your primary insurance amount. That is the number that you would be eligible for based on your earnings record, at your full retirement age every month. It's your primary insurance amount. It's just the, you know, the fancy sort of government word for it or term for it. Your PIA there. And, you know, the percentages have moved around. It's been kind of like a little bit of a roller coaster here these past several years. The increase has been really small some years, other years we've seen bigger jumps and those, um, you know, swings. Tell us more about inflation than they really do about Social Security itself. Right? So yeah, it's one of those things where you just, you can, if past is prologue and we're looking at what inflation has done, you know, we can see about what actually causes these increases, right?

Speaker 3:
Yeah. Well, I mean, I've always heard inflation. So what exactly does that mean.

Speaker 1:
Inflation. Um, you know, it's a three syllable word. It ends in shun. So we gotta, we gotta sing our little tune there. But um, the sort of, I guess bottom line way or the easy way to understand this is it's based on a certain measure of inflation. And this is sort of where a little bit of controversy, uh, that may be a little generous, but a little bit of controversy comes in about how this Cola is calculated because it's based on the CPI, W and W stands for without going into the weeds workers, essentially. So it's like it's, it's based on workers, uh, inflation and not retirees inflation essentially. And so they use the July, August and September measurements that so far this year, uh, they've got to take those into account and then they'll make the announcement in October, the January time period is when that's going to be implemented, right? In 2027. And so it's based on how much costs go up essentially. So they take that CPI W which measures inflation for workers. And then they say, okay, that's that number. And you know, in October, they'll make that announcement about how big the raise and the increase is going to be for next year. So think of it this way. If prices rise, Social Security tries to help benefits. Keep up with that. It's not giving retirees a bonus, like you're not getting a bonus check or anything like that, but it's trying to prevent them from falling behind, essentially, right?

Speaker 3:
So the goal isn't about making retirees richer. It's just trying to keep them even.

Speaker 1:
Right. And that, I mean, Social Security has, you know, for all of its critics out there, for all of its flaws and things, which, you know, there are some real flaws in any system, but it has, you know, stayed true to that. I mean, if you go back and look at quotes from FDR when Social Security was first implemented, Social Security is not meant to get anybody rich. And ain't nobody getting rich off Social Security. You know, you look at the benefit amounts, nobody's getting rich off Social Security. What they are doing is keeping them out of poverty. That's the goal. And so this is another way to try and do that. Because if you didn't have the cost of living adjustment built in automatically, you'd probably be in the poorhouse pretty quickly. And that's a big, big difference between getting rich and just keep it up.

Speaker 3:
Yeah. And I think a lot of people get confused because they think if I'm getting a bigger paycheck, then why isn't this great news?

Speaker 1:
Yeah. I mean, you know, you usually earned the increase the hard way, I guess, is the way to say that because your grocery bills have gone up, your electric bills have gone up, your insurance premiums, health care, prescription drugs, home maintenance, you're receiving more money. And yeah, on the surface, that's great news, but you're spending more money at the same time. And that is the reason it's this weird circle that is just maybe not a fun ride for you. Um, but you know, imagine let's say your employer gives you a 5% raise, but everything you buy suddenly goes up in costs by 6%. Technically, you're making more money, but it's really not good news because you're losing your purchasing power. That dollar doesn't go as far as it used to. And that's exactly what a lot of retirees experience. So I mean, the goal isn't just chasing bigger colas. The goal is needing them less because your retirement plan can absorb that inflation. Yeah. I mean, look, if you if you want a bigger cola, you go to the 7-Eleven and you get the big the big size. Uh, listen, you don't talk about that Diet Coke. I like a crisp Diet Coke or crispy, as the kids say now. Oh my gosh, I can't. Kids, please, can we start with the Gen Xers? Gen Xers? God, why.

Speaker 4:
Is it crispy? It's a.

Speaker 1:
Gen. Gen Zers is what I mean. Can we stop with the crispy thing, please? Um, it's almost as bad as six, seven. Can we stop with the crispy just because the word is crisp? Now, a potato chip is crispy. You know.

Speaker 4:
That's what they're called. Crisps.

Speaker 1:
A thin crust? Yes, a thin crust pizza can be crispy, but if something just, you know, is refreshing or whatever. It's not crispy. It's crisp right there. Like lay off my fridge cigarettes. It's a crispy Diet Coke. Yeah, exactly. So anyway, anyway, chasing bigger colas. Yeah. I mean, you know, if you want to, like I say, if you want a bigger cola, go to the 7-Eleven. But that's, you know what real retirement planning is about here? It's it's the goal is not to just wait on the cost of living adjustment from Social Security. The goal is for Social Security to be the cherry on top to begin with, so that you're not relying on Social Security exclusively and you're not, or primarily, and that it is the maybe the fun money, the money that you have to go vacation with and all these other things. It's not your sole source or even your primary source of income. Yeah. I mean, I hear I mean, every year though, people say, I got my cola and I still feel broke. So why is that? Well, it kind of goes back to that whole CPI w thing and kind of the controversy I alluded to a little bit ago, where it measures the CPI, W is the one that they use, the measure of inflation that they use to calculate what the Cola is going to be for the new year. But that's for workers that measures the things that workers tend to spend money on. But retirees spend differently. You know, you spend more money on health care.

Speaker 1:
You spend more money on prescriptions, you spend more money on maybe housing or insurance and other things, right? You've got different priorities. You're not commuting to an office every day. You're not generally paying for kids to go to school and all the all these types of things. And so the categories, um, of health care especially, and things like prescriptions and housing, those tend to rise faster than others. And so a lot of these advocacy groups out there for seniors, and I say great for them, have argued for years that retirees should have a different inflation index. And, you know, whether that ever happens remains to be seen. I have heard rumblings out there about them actually working on something like that. But, um, we'll see if that actually happens in the future. I think it would be a very good thing. Yeah. And touching obviously on our pride of our podcast here, is there anything unique about this conversation that we should address for the LGBTQ plus retirees? Of course. I mean, you know, LGBTQ plus folks are, um, statistically more likely to rely heavily on Social Security. And so it's an important discussion to have. Lifetime wage disparities are real, especially for older generations of LGBTQ plus folks. Uh, a lot of people don't have adult children to help them absorb rising costs, you know, to either take care of them or go live with or anything like that. So they then rely on Social Security for that as a primary source of income, by and large.

Speaker 1:
Now these are statistics. These are not true of everyone. But statistically speaking, it's the case. Health care, long term care planning, those can become even more important. You're 65 or older. Do you have the correct, uh, Medicare plan in place for you. Do you have a long term care plan at all? Super, super important to make sure that rising costs and inflation don't just, you know, take a wrecking ball to your retirement. And if you're single, you know, your chosen family is your primary support system because, you know, having enough guaranteed income then, uh, you know, is even more important because you are not necessarily relying on that chosen family for financial support. Sure. Emotional support and all those things. Um, and obviously they would support you in whatever way they can, I would hope, but they, um, you know, generally wouldn't necessarily provide the safety net that say, of kids or other family members might. And so, you know, it really does tie back to just the mission of this show to begin with. Um, you know, inflation affects everybody, but it doesn't affect everybody exactly the same. Retirement planning is not one size fits all, and that is why I wanted to do this show to begin with, to make sure that we point out those differences because yeah, it's different for everybody. We are all unique. And as LGBTQ plus folks, we really do, um, you know, have unique needs and considerations that need to be taken into account. Love that. So if someone sees the headlines.

Speaker 5:
This fall and they're saying good news, bigger Social security raise, what's the takeaway?

Speaker 1:
Well, a couple of quick things here. So one, you can celebrate that, but do so with caution. Right. Um more income is nice. But remember why that is going up. Right. Because costs have gone up. Don't depend entirely on Social Security. That's number two. Here. It was never designed to replace your entire paycheck. Just a portion of it. And really just to keep you in your what are supposed to be your golden ears, um, keep you out of poverty. Really? Number three, review your retirement income plan or establish one to begin with. If you don't have one, I would love to help you get one established. You know, you ask yourself a couple of questions and I'll ask you a couple of questions when we meet. Can your investments keep pace with inflation? Can your income last 25 to 30 years, maybe even more in retirement because people are living longer these days. So we'll come up with that plan that's tailored for you. And that's really such an important thing. And number four is don't forget your taxes. Yeah. Social security, you know, up to, you know, more than eight out of $10 of your Social Security could be subject to taxation at a particular rate. And so, you know, a larger Social Security benefit can sometimes have ripple effects combined with other retirement income. And that can mean that you would be due more or the government would do more in taxes from you. And so it is really worth reviewing your overall plan and having periodic reviews at least once a year of your own retirement income plan here.

Speaker 5:
And that's really the bigger message that this isn't just about next year's raise. It's about making sure your retirement is prepared for whatever inflation does next. Because who knows?

Speaker 1:
Yeah. I mean, my crystal ball is broken. And for crying out loud. And so I am. I have no idea what's coming up. But that's why I like to come up with plans for folks that can weather whatever storm might come. And, and we run them through different stress tests and all these things and plot out different scenarios and want you to have a strong retirement, a retirement that you can take pride in. And if your plan only works when inflation stays low, it's not a plan to begin with. It's just a, you know, it's kind of you're throwing it against the wall and hoping it sticks. And it might not because, you know, gravity, but it's not a complete retirement plan. So you need one, you know, I mean, a larger social security Cola. Yeah. It's not necessarily good news. It's not necessarily bad news either. It's just information. And what matters is whether your retirement plan is strong enough to keep up with inflation, your overall retirement plan. You know, whether inflation is 2%, whether it's 4%, whether it's 9%, whatever it is, make sure that you have a plan that doesn't keep you up at night, that inflation doesn't keep you up at night. And if you're wondering if you have that question, if you're watching or listening and you have that question, will my retirement income really keep up with inflation over 20 or 30 years or more? Then I would love to sit down with you for a complimentary retirement analysis. I'll review your Social Security review your your income that you have declared over the years to the Social Security Administration. Run that through different plans and scenarios and look at your overall financial picture, not just Social Security, not just your earnings, but look and see if you're actually ready to retire.

Speaker 1:
Give me a call 2469211. Go to take pride in retirement.com. You can schedule a free consultation. I want to help build a retirement that is good for you. You know, not for anybody else, not for what might have been great 20 years ago for your mom or dad or whomever. But I want something that is going to be good for you and you alone, because there's only one you, after all. All right. Well, that's going to do it for this edition of the show. But, Mr. Attache, pleasure doing business with you. Yes, thank you, Mr. McClure, and thank you for joining us. Whether you're watching or listening, we appreciate you so, so much. Until next time, take pride in yourselves. Take care of each other. We'll see you then. Thanks for listening. To Take Pride in Retirement, members of the LGBTQ plus community deserve to work with the fiduciary financial advisor who puts their needs first. To schedule a free, no obligation consultation with Matt McClure and the team at Active Wealth Management, call (855) 246-9211 or go online to take pride in retirement.com investment advisory services offered through Brookstone Capital Management, LLC. Bcm, a registered investment advisor, BCM and Active Wealth Management Incorporated are independent of each other. Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents. Matt McClure, an active wealth management are not affiliated with or endorsed by the Social Security Administration or any other government agency.

Speaker 6:
Any examples used are for illustrative purposes only and do not take into account your particular investment objectives, financial situation or needs and may not be suitable for all investors. It is not intended to predict the performance of any specific investment, and is not a solicitation or recommendation of any investment strategy. Registered investment advisors and investment advisor representatives act as fiduciaries for all of our investment management clients. We have an obligation to act in the best interest of our clients and to make full disclosures of any conflicts of interest. Please refer to our firm brochure, the ADV two item four, for additional information.

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