Seniors relying on Social Security to cover their basic needs are facing a potentially tougher 2024. Although inflation has slowed down, this might not be the relief many retirees were hoping for.
The annual Cost of Living Adjustment (COLA), designed to help Social Security beneficiaries keep up with rising expenses, will be significantly lower next year compared to recent adjustments.
Early projections from The Senior Citizens League (TSCL) estimate the 2024 COLA at just 2.5%, a sharp decline from the 8.7% hike in 2022 and a drop from 3.2% in 2023. This smaller adjustment could leave many retirees struggling to keep up with persistent high costs in essentials like food, medicine, and energy.
The 2024 COLA: What To Expect
The reduced COLA is a direct result of slowing inflation. The Consumer Price Index (CPI), which measures inflation, has been hovering around 2.5%, a dramatic decrease from the 9% inflation rate seen in 2022.
While lower inflation is generally positive news, it translates into smaller increases in Social Security benefits. For 2024, retirees will see smaller increases in their monthly payments, with the average expected boost to be about $48 per month.
COLA is calculated by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), using data from July, August, and September.
The Social Security Administration (SSA) compares this inflation data to the previous year to determine the adjustment, which is officially announced in October and applied in December.
Though the COLA is meant to help benefits keep pace with the cost of living, slowing inflation doesn’t mean prices are going down. Costs for many essentials have remained high, meaning that the 2.5% adjustment may not be enough to cover retirees’ rising expenses.
Impact on Social Security Beneficiaries
For those dependent on Social Security, a 2.5% COLA offers only a modest improvement. For many retirees, Social Security isn’t just a supplemental income—it’s their primary or sole source of financial support.
Around two-thirds of seniors rely on Social Security for more than half of their income, and 28% depend entirely on these payments to cover basic expenses.
This small COLA increase might feel inadequate, particularly when essential goods like food, healthcare, and energy remain costly. Even with a 2.5% raise, many retirees will still find it difficult to keep up with living expenses.
For retirees who rely heavily on Social Security, the lower COLA could mean tough financial choices. In a year when inflation has slowed but not fully subsided, every dollar counts, and many could struggle to make ends meet.
Why Social Security Is Crucial
Social Security is a financial lifeline for millions of retirees. A majority rely on these benefits to cover more than half of their monthly income.
With prices still elevated for many necessities, even a small reduction in COLA can have a disproportionate effect on those living on fixed incomes.
That’s why advocacy groups like TSCL are pushing for a minimum 3% COLA, arguing that anything lower could jeopardize retirees’ ability to live with dignity and financial stability.
Shannon Benton, Executive Director of TSCL, emphasizes that seniors need adequate protection from rising costs: “Ensuring that seniors have enough to feed themselves and live with dignity is critical. That’s why we are advocating for a minimum COLA of 3%.”
Even a small difference between a 2.5% and 3% adjustment could significantly affect the daily lives of retirees, who are often hit hardest by rising costs in areas like healthcare and housing.
The Fixed-Income Challenge
Retirees face unique challenges when living on fixed incomes, especially during periods of high inflation.
While inflation has cooled, prices for critical goods like healthcare and prescription drugs continue to rise.
Unfortunately, these expenses disproportionately affect older adults, often outpacing the general inflation rate and creating a disconnect between the COLA and the actual financial pressures retirees face.
A smaller COLA in 2024 means retirees on Social Security may feel even more of a squeeze. While the increase will provide some relief, it may not be enough to offset the rising costs of healthcare and other essential services.
For those entirely dependent on Social Security, the gap between their income and expenses could grow wider.
Long-Term Concerns
The long-term implications of a lower COLA are concerning. If inflation spikes again in future years, retirees could face even more significant challenges.
With smaller annual adjustments, Social Security benefits might struggle to keep pace with rapidly rising costs, leaving retirees vulnerable.
The gap between COLA adjustments and actual living expenses raises questions about how Social Security benefits are calculated.
There is growing momentum for more robust protections for retirees, particularly for those who rely almost exclusively on Social Security for their financial well-being.
The potential for inflation to fluctuate means this issue won’t go away soon. Advocates and policymakers will need to continue discussions on how to ensure that Social Security recipients are better protected from economic instability, especially in a world where prices can rise faster than incomes.
For now, the reduced 2024 COLA will offer only a modest boost to retirees’ monthly benefits, and many will need to stretch their payments further to maintain their standard of living.
FAQs
Why is the 2024 COLA lower than last year?
Inflation has eased, reducing the need for larger adjustments.
How much will the average Social Security payment increase?
The average increase will be around $48 per month.
Who decides the COLA adjustment?
The COLA is determined by inflation data from the CPI-W.
What can retirees do if their benefits aren’t enough?
They can explore additional support like SSI and SNAP benefits.
What is TSCL advocating for?
TSCL is pushing for a minimum 3% COLA to better protect retirees.
