What The 2020 COLA Boost Means for Advisors
Big news this week from the Social Security Administration. The SSA on Thursday revealed they would enact a 1.6% COLA (Cost-Of-Living Adjustment) increase for 2020. The newest increase is significantly lower than the previous two years (2% in 2018 and 2.8% in 2019). Last year’s boost gave beneficiaries and an average of $40 more a month on their checks. Next year, those 69 million Americans who receive Social Security payouts will see an additional $23 on their monthly benefits. The average payout will be roughly $1,460 per month.
Additional details from the SSA’s announcement include:
- The taxable maximum will increase to $137,799
- The earnings limit for workers younger than full retirement age will increase to $18,240
- The earnings limit for those turning 66 in 2020 will increase to $48,600
- No earnings limit for those who are full retirement age or older for the entire years
After two years of higher increases, the 2020 drop-off could be a reason for beneficiaries to be concerned. Because the SSA bases COLA increases on the consumer-price index urban workers (CPI-W), rather than that of seniors (CPI-E), a 1.6% boost is considered by some too insufficient in the face of real-world inflation and rising medical expenses. In a statement issued shortly after Thursday’s announcement, Webster Phillips with the National Committee to Preserve Social Security and Medicare says COLAs are “out of sync” the living expenses retirees face.
“Retirees have been living on very tight cost-of-living adjustments for a number of years now, which forces them to make hard decisions about their monthly budgets,” said Phillips.
Social Security recipients also need to be aware of how rising Medicare premiums will impact their monthly benefits. While those figures won’t be released until December, the most recent Medicare Trustees’ Report estimates that Part B premiums will rise by nearly $10 a month. For some retirees living on a limited income, this could lessen the buying power of their COLA boost.
An estimated 1 in 4 seniors will rely on Social Security benefits as a primary source of retirement income. With rising living and medical costs offsetting the benefits they receive, it’s vital that agents and advisors work to connect with retirees and offer better solutions.
So, how can you effectively reach the retiree/Baby Boomer market?
Even for seniors, social media can be a valuable marketing tool, with Facebook having the largest audience in that demographic. Some studies show that close to 50% of people aged 65 and up actively use Facebook. Reach these consumers by sharing relevant articles and/or blog posts on your business page. For more qualified results, use Facebook’s age and location targeting options for sponsored posts and ads.
Drip email campaigns can also be effective. However, because most Boomers value a personal touch over online connections, direct mail might get a better response. In fact, any marketing tactic that involves personal interactions will likely go a long way toward establishing credibility and building relationships with retirees and those nearing retirement. Seminars and workshops are a great way to make those connections.
What questions do you have about how to better engage with pre-retirees and retirees who could benefit from some education on Social Security? Get in touch and find out how we can help.