Social Security COLA Misses the Mark on 2024 Prices: People who are retired are getting more money from Social Security as the new year starts. This year’s costs, though, show that it’s not even close to enough.
There is an extra 3.2% in the 2024 cost-of-living adjustment (COLA) for Social Security. It starts this month. But new study from The Senior Citizens League shows that since December 2023, the costs of living for two-thirds of American retirees have gone up by about 10%, which is more than three times the COLA.
Social Security COLA Misses the Mark on 2024 Prices, Reveals Study
“I think I characterize our mood as a sober start to the New Year,” said Mary Johnson, a Social Security and Medicare analyst at the League. “Living on retirement income is not going to be for the faint of heart.”
Over the past 20 years, the average increase in COLA has been 2.6%, so the new raise is pretty significant. At the same time, inflation is going down. The consumer price index only went up by 3.1% in November 2023, down from 9.1% in June 2022.
But prices stay high even when the rate of inflation goes down because inflation is sticky. The Senior Citizens League kept track of how many of seniors’ main costs were going up and found that the COLA was clearly behind.
In the year between December 2022 and December 2023, the cost of car insurance went up by 19.2%, which is six times the COLA. The amount of outpatient hospital care went up by 7.3%, which is 2.3 times the COLA. Also, home prices went up by 6.7%, which is 2.1 times the COLA.
This year, the Social Security Administration thinks that people who are retired will get a little more than $50 more each month. Johnson said that amount doesn’t really make a difference in the budget of an average pensioner.
“I’m sure many are struggling to quell a sense of drowning over just how far they can stretch an extra $50 or so,” she stated.
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Another cost that is going up is Medicare. Part B, which covers outpatient care, has a standard monthly rate that is $9.80 more in 2024 than it was the previous year. This is a rise of about 6%. It’s important to note that Part B payments are taken out of Social Security checks instantly.
But because of the Inflation Reduction Act, Part D is also costing more than it used to. HealthView Services, a company that studies health care, says that Part D premiums, which cover prescription drugs, will go up by an average of 35% in 2024.
It looks like 2024 will be a very expensive year for seniors. Even though Social Security is giving out more money than last year, it is not keeping up with prices. But many advisors tell their clients that the program is only meant to replace about 40% of a person’s income from work.
Julie Bray, owner of GW Financial in Reno, Nevada, said, “It’s crucial to acknowledge that Social Security was never intended to be the sole source of income for retirees,” “It serves as a valuable safety net, but individuals should ideally have supplemental retirement plans in place.”
Still, if Social Security doesn’t keep up with inflation, that part of a client’s retirement income will go down. Bray offers a number of ways to cut costs or make more money in order to cope.
“For those struggling to pay bills amidst this year’s higher cost of living, we often explore creative solutions, such as reevaluating discretionary spending, exploring potential part-time employment opportunities or considering downsizing living arrangements,” said Bray.
Some advisors go straight for the Medicare part of the puzzle. A certified financial planner (CFP) named Greg Giardino works at Atlas Fiduciary Financial in Oakland, New Jersey. He tells his clients that they should look over their Part D choices during the open enrollment time, which lasts from October to December.
“Retirees need to be vigilant in examining their expenses,” said Giardino. “Making sure your expenses align with your values and needs — and removing or cutting those expenses that don’t — can help bolster your savings.”
