What If Social Security Adjusted Benefits Monthly Instead of Annually — Would Retirees Finally Keep Up With Prices?

Social Security benefits are meant to keep up with inflation, but adjustments only happen once a year. When prices rise in between, retirees are left to absorb those increases. But what if these cost-of-living adjustments (COLA) were made monthly instead?

More frequent changes could help retirees stay closer to real-time costs, but they might also come with some downsides. Here’s what experts had to say about these hypothetical monthly Social Security adjustments.

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What Would This Mean Exactly?

If Social Security benefits were adjusted monthly, payments would rise or fall in smaller increments based on short-term changes in inflation data. This means retirees would see more frequent updates tied to how prices are moving in real time.

Monthly adjustments could also lead to higher total benefits over time, according to Doug Carey, chartered financial analyst (CFA) and president at WealthTrace. Because increases would be applied sooner, those payments would have more time to compound.

“Let’s say we have a person receiving Social Security benefits of $4,000 per month. Assume COLA is 2.75% per year,” Carey explained. “Over one year, the benefit would be an extra $602 due to the monthly adjustment and compounding. Over 20 years, it would be nearly $16,000.”

Could Retirees Keep Up With Prices?

During periods of inflation, it could be easier for retirees to keep up with prices. However, Steve Sexton, CEO of Sexton Advisory Group, pointed out that most retirees don’t experience inflation the same way it’s measured on paper.

“Healthcare, insurance, housing — those are the big-ticket items, and they tend to move on their own timeline,” Sexton said. “So even if Social Security is adjusting monthly, it doesn’t necessarily mean someone feels caught up. It just means the benefit is reacting more quickly.”

Would Budgeting Be More Difficult?

Both Carey and Sexton agreed that it would make budgeting more difficult. According to Carey, the deposit would change every month, spending targets may need adjustments. It’s not easy to memorize your base monthly income and tracking cash flow is not as clean.

“Social Security is usually the one piece of income people don’t have to think about — it just shows up, same amount, every month,” Sexton said. “If that number starts changing, even slightly, it adds another layer to manage.”

Potential Downsides

Carey stated that there’s no real downside for retirees, but there could be broader implications.

“I will point out that this would make Social Security insolvent more quickly,” Carey noted. “Currently, it is projected to be insolvent in late 2032.”

However, Sexton pointed out that it could add unnecessary stress.

“It would make Social Security feel a lot less like a fixed benefit and more like a moving target,” Sexton said. “I’ve worked with retirees long enough to know that once income goes up, people adjust their spending, even if they don’t realize it. If that income drops a few months later, it creates stress pretty quickly.”

This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.

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