Social Security benefits are getting their biggest cost-of-living bump in 40 years, a 5.9% increase for 2022, but even that isn't enough to offset what inflation is doing to money sitting in cash. Our Managing Principal, Daren Blonski, made that point directly to Financial Advisor magazine for its article, "Social Security Benefits To Get Biggest Increase In 40 Years". "Right now, we are really focusing clients on inflation to make sure they aren't leaving too much money in cash," he said. Outside of what's needed for emergency savings, he added, "needlessly sitting on cash amounts to an automatic 4-5% haircut as a result of inflation."
Key Takeaways
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Even a historic 5.9% Social Security COLA for 2022 doesn't fully offset the inflation retirees and savers are actually feeling.
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Holding cash beyond what's needed for emergencies isn't a neutral choice. In an inflationary environment, it can quietly cost 4-5% a year in lost purchasing power.
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The Social Security earnings limit and maximum taxable earnings are adjusting for 2022 too, worth checking if either affects your specific situation.
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Reviewing how much cash you're holding, and why, is a simple, concrete step during periods of higher inflation.
Deciding how much to hold in cash versus investing it is one of the most common conversations we have with clients, especially in periods of higher inflation. Learn more about our Investment Management services.