Using Social Security's 8.7% COLA to Improve Your Finances

Social Security announced last week that there will be an 8.7% increase in Social Security Income payments in 2023. That equates to an average increase of $140/month starting in January. For many of my clients who worked into their late 60s, the increase will be $200-$300/month.

The increase is timely as many individuals have faced the burden of increased costs on everything from food to utilities. 

Many individuals have no other choice than to get caught up on bills that they have fallen behind on as prices have soared. For others, they may have the opportunity to start getting ahead. I was recently meeting with a couple who mentioned that they weren’t putting as much in their emergency fund each month as they would like. They typically put $1,000/month aside for unexpected costs but have recently only been putting in $300-$400. We calculated their COLAs for Social Security benefits and found that they will have an extra $400/month coming in starting in January. We agreed to automate this increase into the emergency fund each month, almost getting them back up to their savings target.

This strategy of “ratcheting” can be used regardless of whether you are on Social Security. If you are in a job that provides a COLA to your salary, you can use it as an opportunity to increase automated savings without having to feel the pain of less spending money. Of course, money is meant to be spent and enjoyed, so if you find yourself in the position to do so, consider splitting the difference – giving yourself a small lifestyle raise while also increasing savings!

Happy Planning,

Alex

This blog post is not advice. Please read disclaimers.