Paltry Increase in Social Security for 2017

Last week the Social Security Administration announced a slight increase in Social Security benefits for the New Year. After a year with no increase in social security benefits, any increase is welcomed, but the coming year’s increase won’t pay for much more than a cup of coffee.

The monthly Social Security and Supplemental Security Income benefits will go up 0.3% in 2017. Retirees receiving social security should expect to see the increase when they receive their January 2017 benefit check. For some perspective, according to the Social Security Administration, the average monthly benefit received by a retired worker is currently $1,355 per month. Beginning in 2017, the average benefit for all retired workers is estimated to be $1,360. That is a $5 per month—$60 annually—increase.

As we can see in the table, the increase to Social Security benefits have been fairly mixed over the last 10 years. In fact, the three time periods where we see no increases are the only three times that these benefits occurred since 1975 when the current cost of living adjustment system was put in place.

Cost of living adjustments are a double edged sword. On one hand it is great to get more every month from Social Security. On the other hand, whenever a cost of living adjustment occurs, it means that the price of the goods we buy are going up.

Inflation has been fairly low since the Great Recession of 2008 and 2009. Of the last eight years, only one year experienced inflation greater than 2%. From an economic perspective seeing some increase in prices is a sign that the economy is doing alright. It means that manufacturers are able to raise their prices and it means that demand for goods and services is also starting to rise.

So, enjoy that nice cup of coffee! Chances are it will probably cost more this year than it did last year and that’s okay since it means our economy is moving forward.

Earning Season Update: We are in the middle of earnings season and this is one of the busiest reporting weeks. According to Standard and Poor’s, 38% of the market capitalization of the S&P 500 Index is reporting this week. Data from Factset suggests that 78% of the companies that have reporting earnings thus far (almost of quarter of the S&P 500 Index has as of Friday, October 21) have beat their earnings estimate. And, with the strong earnings performance versus forecast, we may see the first quarter of a year-over-year earnings increase.

The views and opinions contained herein are those of Bellatore Financial, Inc. and have been researched and analyzed by Jonathan Scheid, CFA, President & Chief Investment Officer.

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