How do you factor COLA in Social Security? Do you just take an average of the prior years?
How Do You Factor COLA for Retirement Income Needs?
- Thread starter Justin Bilyj
- Start date
- 10,328
There is nothing to really factor imo. The increases are what they are. We have no way of knowing what they will be.
But, you can probably count on 1%-2% average if you look at historical figures. of course historically SS hasnt been underfunded as much as it currently is... and the method for figuring out cola is very screwy.
The best thing to do is to make sure that you have other sources of income that will increase for inflation. Also, imo, it is best to plan for an income above what you need, then save what you dont use. This way, down the road as inflation creeps in, you have a bit of a safety net with the spare income and savings. obviously the ability to do this varies.
I like using spias, but the rate environment sucks right now. IA riders are a good option right now, but most do not include inflation protection... but... most do accumulate a higher amount (to calculate income from) vs. using other products to accumulate.... so they will start out at a higher rate than alternatives, which should give some inflation breathing room...
But, you can probably count on 1%-2% average if you look at historical figures. of course historically SS hasnt been underfunded as much as it currently is... and the method for figuring out cola is very screwy.
The best thing to do is to make sure that you have other sources of income that will increase for inflation. Also, imo, it is best to plan for an income above what you need, then save what you dont use. This way, down the road as inflation creeps in, you have a bit of a safety net with the spare income and savings. obviously the ability to do this varies.
I like using spias, but the rate environment sucks right now. IA riders are a good option right now, but most do not include inflation protection... but... most do accumulate a higher amount (to calculate income from) vs. using other products to accumulate.... so they will start out at a higher rate than alternatives, which should give some inflation breathing room...
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