Editor’s Note: An earlier version of this story ran in August. This story has been updated to reflect the latest news.

The announcement that Social Security retiree benefits will rise by 5.9% next year – the largest cost of living increase since 1982 – should be welcome news for many seniors.

Besides the strain of the pandemic, those living on low to moderate incomes have been hit especially hard by the one-two punch of rising inflation and low interest rates.

Senior citizens found themselves paying more for essentials, while earning next to nothing on their savings and getting a monthly Social Security check that rose by just $20 on average in 2021.

That small increase was based on inflation growth from the third quarter of 2019 to the third quarter of 2020. So it didn’t account for the pandemic-induced inflation spike that occurred this year.

As a result, the upcoming 5.9% bump will help compensate for that shortfall, since the average Social Security retiree check will increase by $92 to an estimated $1,657 per month.

But it’s unlikely to make seniors whole again for a few reasons.

For starters, inflation isn’t going away, so “the buying power of Social Security benefits may continue to erode into 2022,” said Mary Johnson, the Social Security and Medicare policy analyst for the Senior Citizens League.

What’s more, rising Medicare premiums – which are deducted from one’s Social Security check – will reduce the amount left over to pay for other essentials, according to the Center for Retirement Research at Boston College.

Johnson notes the Centers for Medicare and Medicaid Services have estimated that prescription drug plan premiums will increase by nearly 5% in 2022. And the Part D out-of-pocket threshold before reaching the catastrophic phase of coverage will grow by 7.6%.

Taxes may also become an issue for some, since the threshold for family income that determines whether a portion of your Social Security benefits will be taxed is not adjusted for inflation. So as your check grows, so too will the chance that you will owe income taxes on a portion of it.

Modest income, modest net worth

Social Security benefits are a major source of income for the majority of retirees, according to the Social Security Administration. They make up at least half of the monthly income for 50% of married recipients and 70% of single recipients.

For many of those retirees, the potential to draw income from elsewhere – such as savings, investments and home equity – is modest. Seniors with average household income of $29,000 a year, for instance, have an average net wealth of $278,742, according to the Center for Retirement Research, which based its calculations on the Federal Reserve’s 2019 Survey of Consumer Finance. Those earning just under $15,000 a year had an average net wealth of $123,841.

In an email survey this summer, the Senior Citizens League asked retirees what financial changes they had made since the pandemic started. Among the more than 500 responses, 34% said they had tapped their emergency savings while 19% said they applied for food assistance (SNAP benefits) or visited a food pantry. Another 19% said they had to draw down more from their retirement savings than they planned.

Playing it too safe presents its own risk

As asset classes go, US stocks were a good place to be this year, having risen 100% from the lows they hit at the start of the pandemic.

But many retirees often rely more heavily on safer investments that pay interest. Keeping money in cash and cash-equivalent assets, like CDs, money markets and interest-bearing savings accounts provided paltry growth this year, given that anemic interest rates were far outpaced by inflation. That eroded many savers’ purchasing power. Many bonds didn’t perform well, either, with the S&P 500 bond index and most S&P US Treasury bond indexes trading down year-to-date.

So for retirees, managing their savings for maximum return is especially tricky these days.

Interest rates are unlikely to increase before 2023, according to the Federal Reserve’s own economic projections. And the roaring stock market may be in line for a correction sooner rather than later.

So what’s a risk-averse retiree with modest means to do?

William Nunn, a fee-only certified financial planner who founded Horizon Financial Planning in New Orleans, recommends retired clients have at least six months’ worth of their bill payments in cash.

Given how low interest rates are, he prefers putting that money in savings accounts over CDs to avoid the penalty that you may incur if you have to pull money out of a CD before it comes to term. “It’s not worth the risk of losing the CD interest you earned to break it. And if you do, you also may have to pay a fee,” Nunn said.

Beyond money for bills and any other funds stashed in a liquid account for emergencies, retirees who are keeping the rest of their savings in bonds and cash-equivalent assets may be taking on more risk than they realize, the Senior Citizens League’s Johnson said.

“The low interest rates are taking a huge toll on retirement plans. And retirees who are invested in CDs and bonds are not getting the type of return they need to make savings grow and last through retirement. That means more people have to turn to equities and investments, such as real estate.”

While that will entail more risk and volatility, it may offer the best chance of beating inflation over time if you invest funds you won’t need for five or more years.

While it would be optimal, the goal is not for every dollar saved or invested to outperform inflation so much as it is for your retirement savings as a whole to do so over time, Nunn said. “You should view your portfolio in terms of a total return.”