• The last time the inflation measurement warranted a COLA increase was at the end of 2008. The resulting increase for 2009 was larger than normal because of increased energy prices in late 2008.
• The formula does not account for all increases in everyone’s living costs. For instance, Medicare Part B premiums will be higher in 2012. These premiums are deducted automatically from monthly Social Security payments to cover doctor visits for many recipients. However, the amount of the increase – $3.50 more per month for most beneficiaries, according to the U. S. Department of Health and Human Services – was not announced until after the 3.6% COLA, which the Social Security Administration estimates will average $43 more per month for most recipients.
• Fears of a “double-dip” recession in the United States has driven prices for staple commodities, such as oil and food, down from the highs reached last spring. More recently, however, those prices have begun to climb again, reinforcing the need for cost of living increases.

• If you retire early, Social Security can immediately replace a portion of your lost income, but this benefit should be compared to the larger benefit amount you could receive by waiting.
• If you stop working and defer benefits until later, consider other sources of income you might rely on until you reach FRA (see No. 3 below).
• Health and family history should also be considered. In general, the longer you expect to live after retirement, the better off you are deferring the start of your payments.
• A spouse, minor or disabled children and dependent parents all can potentially collect benefits based on your earnings. Taking benefits early and allowing other family members to receive benefits, even if for a relatively short time, could be more advantageous than deferring them.

• Other sources of income – such as those you could receive from a properly calibrated and managed mix of fixed-income and dividend-yielding equity investments – could allow you to defer the start of benefits, ultimately leading to a larger annual benefit amount and a significant increase in lifetime benefits.
• Using personal savings in the early years of retirement allows you to take advantage of delayed retirement credits for deferring Social Security beyond your FRA. This option might be particularly attractive in what many expect to be a persistently low-interest-earning environment for money markets and other savings vehicles.

If you’re currently receiving Social Security Benefits and want to get a better sense of what 2012’s cost-of-living adjustment might mean for your particular situation, or if you are wondering when it makes the most sense to start receiving your benefits, talk to your Financial Advisor. In many cases, there are planning strategies that could help you and your family maximize your Social Security benefits within your lifetime.