A proposed bill by Massachusetts Senator Elizabeth Warren to give Social Security recipients a one-time lump sum of $581 highlights the need for Americans to save more for retirement.

The proposed bill, the SAVE (Seniors And Veterans Emergency) Benefits Act, would give seniors a 3.9% increase in Social Security benefits following October’s announcement that there would not be a cost of living adjustment in 2016, the third time since 1975. The 3.9% increase correlates with raises that America’s top CEOs received last year.

“The bill is paid for entirely by closing a tax loophole that allows corporations to write off obscene executive bonuses as a business expense for ‘performance pay” - a loophole that would generate so much revenue that we could give every senior this $581 check and still have money left over to extend the life of the Social Security trust fund,” Warren in a written statement.

The $581 increase amounts to nearly three months of groceries for seniors or one year's equivalent of out-of-pocket costs on critical prescription drugs for the average Medicare beneficiary, she said.

“If we do nothing, on January 1, more than 70 million seniors, veterans and other Americans won't get an extra dime in much-needed Social Security and other benefits,” Warren said.

The amount might seem nominal, but it affects many people living on a fixed budget.

"It may sound like a small amount to some people, but to a woman who depends on Social Security for basic living expenses, this infusion would mean a lot," said Bobbie Brinegar executive director of OWL, a Washington, D.C-based non-partisan group that advocates for women’s economic issues. “The average annual Social Security benefit for women 65 and older is about $13,500 per year. When you consider what these women have contributed over the years, this 'bonus' has definitely been earned."

Income from Social Security should be viewed only as the fixed income portion such as bonds of a retirement portfolio, said C.J. Brott, founder of Capital Ideas, a registered investment adviser in Dallas and a portfolio manager at Covestor, the online investing marketplace.

“If interest rates don’t rise than neither should cost of living adjustments,” he said. “It does squeeze a little and is screwed up, but so is a zero interest rate policy world. Blame it all on the Fed.”

Consumers need to be more diligent about saving more money, especially when they are younger to alleviate any future issues such as cuts to Social Security payments.

“Our government is either going to abolish Social Security cost of living adjustments on a means tested basis or put a version of amortization on Social Security benefits,” Brott said. “Either way, that portion of your fixed income being generated by Uncle Sam will be worth less and less in real spending power as the government becomes less and less able to finance its spending.”

One issue which is often overlooked is that Social Security needs to be modernized, which includes improving in the area of cost of living adjustments, said Jamie Hopkins, a retirement professor at the American College of Financial Services in Bryn Mawr, Pa.

The current system relies on the Consumer Price Index for Urban Wage Earners and Clerical Workers (or CPI-W), which is published by the Bureau of Labor Statistics, but the measure does not track the spending habits of seniors or the impact of inflation on seniors, he said.

Instead, revamping Social Security should include basing cost of living adjustments on a “more accurate measure of the inflationary impact” on seniors, by using the Consumer Price Index for the Elderly (or CPI-E), because it tracks the impact of inflation on spending and is a “much better measure to use for cost of living adjustments,” Hopkins said.

“Tying cost of living increases for Social Security to the CPI-E is the right thing to do both for seniors and for the Social Security system,” he said. “Everyone knows that it is not cheaper for a senior to meet their needs this year than it was last year. However, that is just what Social Security told everyone by not increasing benefits to account for inflation.”

Using the current method to calculate benefits from Social Security “does not work for most retirees,” because it resulted in a lack of an increase in benefits, said David Freitag, a financial planning consultant focused on Social Security and retirement income planning with Massachusetts Mutual Life Insurance Company in Springfield, Mass.

“Each day as more and more Baby Boomers start collecting Social Security benefits, the existing method of calculating the cost of living adjustment part of the Social Security program becomes increasingly disconnected from the reality of the US economy and requires careful review,” he said.

Moving to utilizing a CPI- E index instead would have increased benefits by 0.6% for seniors, according to estimates because it recognizes that seniors have “different expenses and costs in retirement than non-retirees,” Freitag said.