Retirement benefits are not meant to be your main source of income. It is unlikely that retirees can get by with just Social Security benefits. These benefits replace only about 40% of pre-retirement wages for average earners. This percentage doesn’t even account for potential benefit cuts, which could be on the horizon in about ten years as Social Security’s trust funds run out of money.
Social Security benefits provide a limited amount of replacement income. Additionally, the program’s cost-of-living adjustments (COLAs) are not effective at helping beneficiaries maintain their buying power as inflation drives living costs upward. The latest Seniors Citizen League report showed retirees who filed in 2000 had lost about 36% of their buying power.
Social Security COLA is not enough
According to a Motley Fool survey, 62% of participants said they felt Social Security’s most recent 3.2% Cost of Living Adjustment, which took effect this past January, was insufficient. Moreover, 44% of respondents are considering a return to work because Social Security isn’t providing them with enough income to keep up with their living expenses.
Retirement is often seen as a time to relax and enjoy the fruits of your labor, but for many, working during retirement offers several benefits. However, there’s a clear distinction between choosing to return to work for enjoyment and being compelled to do so due to financial pressures. Unfortunately, a significant number of Social Security recipients find themselves in the latter situation.
Going back to work while on Social Security
If you’re heavily reliant on Social Security for your income and find that it’s not enough to cover your expenses, returning to work might be a necessity. While it’s possible to attempt cutting back on expenses, there’s often a limit to how much you can reduce costs. In such cases, getting a job may be your best option.
The Benefits of Working in Retirement
One of the advantages of continuing to work during retirement is that it helps you stay busy and engaged. Work can also serve as a valuable social outlet, offering opportunities to interact with others. This social interaction is crucial as many retirees struggle with feelings of loneliness and isolation.
- Stay Active: Working keeps you physically and mentally active.
- Social Interaction: Provides opportunities to connect with others, reducing loneliness.
- Financial Stability: Additional income can help you manage your expenses better.
In summary, while working in retirement can be a choice for some, for others, it’s a necessary step to ensure financial stability. By staying active and engaged, you can also combat loneliness and find new social opportunities, making the experience both rewarding and fulfilling.
Going back to work isn’t always ideal, especially if it’s not something you’re passionate about. Before settling for a mundane and unfulfilling job, consider exploring the gig economy first. You might discover that you can transform a hobby you love into a lucrative source of income.
Turn Your Passion into Income
For instance, if you’ve spent your life playing the piano, you could offer piano lessons and generate income. This type of work might be far more satisfying than standing behind a cash register or performing monotonous administrative tasks in an office.
Changes to Social Security COLA Calculations
Many retirees feel their COST-OF-LIVING ADJUSTMENTS (COLAs) aren’t keeping up with inflation. One significant reason is that these adjustments are based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). However, the CPI-W doesn’t accurately reflect the costs that seniors specifically face. Therefore, a more suitable approach would be to calculate COLAs using the Consumer Price Index for the Elderly (CPI-E).