Social security, first passed in 1935 as part of Franklin Delano Roosevelt’s New Deal, encompasses a host of social insurance programs, including well-known federal benefits such as temporary assistance for needy families, unemployment insurance, Medicare, Medicaid, and the State Children’s Health Insurance Program.
In common parlance, however, Social Security is usually used to refer to the benefits paid to elderly retirees, officially referred to as Federal Old-Age, Survivors, and Disability Insurance.
Recipients of benefits under the program, numbering around 58 million seniors across the United States, received a stiff dose of reality last week when the government announced that it would not increase benefit amounts this year. Instead, benefits will remain at the current rate until at least 2012. This is the second year benefits for seniors have remained stagnant.
This also marks the first time a year has passed without a benefit increase since the US government enacted automatic inflation adjustments in 1975.
Those measures tie Social Security benefit raises to the Consumer Price Index, an economic measure that calculates inflation by tracking the rise in prices of consumer goods. When inflation is negative or unchanged, as it was both this year and last year, Social Security benefits remain at their current rates.
For currently retired seniors, this may mean tightening your belt. If you’re one of the 64% of retirees who rely on Social Security benefits for your primary source of income, you may have to find places to save.
That can be tough to do when your primary income is the average Social Security check, which amounts to about $1,072 a month. But, don’t get disheartened yet!
Saving money may not mean giving things up. First things first, read more articles here on Dough Roller for tips on how to save money. If you can get the same products and services you need and want for less, you may not need to give anything up. You’d be surprised how much money you can save by shopping around for insurance, and how much a cash back credit card might save you, if you make sure to pay the balance in full every month.
You can also think about part-time employment. For retirees born between January 2, 1943 and January 1, 1955, you can make any amount in earnings and keep your benefits, provided you have reached the full retirement age of 66. Think about starting a small business part-time: teach piano lessons, make and sell crafts, write for publications aimed at seniors.
For those of thus still facing the daily grind, this news offers a sad but teachable moment: make sure you’re fully funding your own retirement.
Save all you can. Determine your financial goals and develop strategies to attain them. If you’re young and you aren’t saving, start now!
Every expert points out that you will miss out on years of potential growth if you don’t start socking money away in your twenties. The more you wait, the more you’ll have to save down the road.
Don’t underestimate the power of finding the broker or bank with the most competitive rates but know that excessive fees will cut into your growth, so find the most competitive online discount brokers or mutual funds that suit your goals and save save save!
Published or updated April 5, 2013.