Last month's announcement of the 8.7% Social Security cost-of-living adjustment came with some fanfare, as it's the largest in almost 40 years. But is it enough? Will it help retired Americans? We asked them to find out.
The Motley Fool surveyed 750 retired Americans to ask about the cost-of-living adjustment, how much they rely on Social Security benefits, their current financial situation, and more.
Key findings
- More than half of retired Americans say the Social Security cost-of-living adjustment isn't enough, while nearly 40% say it's about right.
- 85% of retired Americans have noticed the effect of rising inflation on their daily expenses and say it's stretching their budget.
- Retired men rely on Social Security less and struggle less with daily finances than retired women.
- More than half of retired Americans are worried about the longevity of the Social Security benefits program.
Most retired Americans say the cost-of-living adjustment isn't enough
In The Motley Fool's survey of 750 retired Americans, 55% of respondents said that the cost-of-living adjustment wasn't enough.
| How do you feel about the 8.7% cost-of-living adjustment for Social Security benefits in 2023 (this will raise monthly payments by $146, on average, for retired workers)? | Percentage of respondents |
|---|---|
| It's not enough | 55% |
| It's about right | 39% |
| It's too much | 2% |
| I don't understand the cost-of-living adjustment | 4% |
It's worth noting that 39% of respondents felt that the cost-of-living adjustment was "about right," indicating that the adjustment didn't fall completely flat with retired Americans.
But why do more than half of retirees think the adjustment isn't enough? The survey indicates that inflation could be a big part of the problem. The inflation rates seen in 2022 are the highest in about 40 years, and the vast majority of retired Americans surveyed say that they're feeling it:
| Have you noticed the effect of inflation on your daily expenses? | Percentage of respondents |
|---|---|
| Yes, and it's stretching my budget | 85% |
| Yes, but it's not a big deal | 12% |
| No, I haven't noticed | 3% |
If 85% of retired Americans are feeling the effects of inflation, it's no wonder that more than half say the 8.7% cost-of-living adjustment isn't enough.
Historical cost-of-living adjustments
It's still worth noting that 8.7% is the highest cost-of-living adjustment we've seen since 1980, which saw a 14.3% increase. Here's 30 years of historical cost-of-living adjustments to give you an idea of the average adjustment for the past few decades:
| Year | Social Security cost-of-living adjustment |
|---|---|
| 1994 | 2.6% |
| 1995 | 2.8% |
| 1996 | 2.6% |
| 1997 | 2.9% |
| 1998 | 2.1% |
| 1999 | 1.3% |
| 2000 | 2.5% |
| 2001 | 3.5% |
| 2002 | 2.6% |
| 2003 | 1.4% |
| 2004 | 2.1% |
| 2005 | 2.7% |
| 2006 | 4.1% |
| 2007 | 3.3% |
| 2008 | 2.3% |
| 2009 | 5.8% |
| 2010 | 0.0% |
| 2011 | 0.0% |
| 2012 | 3.6% |
| 2013 | 1.7% |
| 2014 | 1.5% |
| 2015 | 1.7% |
| 2016 | 0.0% |
| 2017 | 0.3% |
| 2018 | 2.0% |
| 2019 | 2.8% |
| 2020 | 1.6% |
| 2021 | 1.3% |
| 2022 | 5.9% |
| 2023 | 8.7% |
Almost three-quarters of retired Americans say they rely on Social Security benefits "a lot" or more
There's a great deal of disagreement over how important Social Security benefits are to retired Americans, and many studies measure retirement income and poverty rates differently.
Instead of relying on previous studies, we asked our survey respondents directly how much they rely on Social Security payments. Here's what they said:
| How much do you rely on Social Security benefits? | Percentage of respondents |
|---|---|
| I rely on them completely | 40% |
| I rely on them a lot | 32% |
| I rely on them a little | 13% |
| I don't rely on them at all | 15% |
72% of respondents said they rely on Social Security benefits either "a lot" or "completely." Taking into consideration the number of retirees who are feeling the effects of inflation, it's becoming clearer why so many say the cost-of-living adjustment wasn't enough.
Retired men say they rely completely on Social Security benefits less than retired women do (34% and 44%, respectively). This echoes a recent Ellevest finding that men "feel like they're able to prioritize their futures" more than women when it comes to financial planning. The No. 1 priority for men was increasing their retirement accounts, while the top priority for women was supporting their families (family planning, child care, taking care of parents/siblings, etc.).
The highly documented gender wage gap may play a role in this disparity, but there are other factors here to be explored in the future.
Retired men and women also answered differently when we asked about their financial situation in general. Here are the results from all 750 retired Americans:
| How would you describe your financial situation? | Percentage of respondents |
|---|---|
| It's a daily struggle | 27% |
| I'm struggling a little | 35% |
| I'm doing mostly fine | 33% |
| I have no financial worries | 5% |
The average retiree overall answered, "I'm struggling a little," but results were split when looking at gender. Men were more likely to say, "I'm doing mostly fine," while more women admitted to struggling a little.
This disparity also carried over into the question of whether retirees are worried about the Social Security program being around through their retirement.
Related Social Security topics
More than half of retired Americans are concerned about Social Security's longevity
"Don't plan on Social Security being around" is a common refrain when it comes to retirement planning.
Whether Social Security retirement benefits are likely to be available to retirees in the future is a complicated question. But this survey shows that retirees are worried.
| Do you believe that Social Security will be around through your full retirement? | Percentage of respondents |
|---|---|
| I'm very worried about Social Security | 29% |
| I'm slightly worried about Social Security | 29% |
| I'm slightly confident in Social Security | 22% |
| I'm very confident in Social Security | 20% |
Almost 60% of respondents to the survey said they were at least "slightly" worried about Social Security being around through their full retirement.
Men were more likely to be slightly worried, while women were more likely to be very worried, continuing the pattern of women facing greater financial difficulties in retirement.
Respondents younger than 64 were more likely to be very worried, while older respondents were more confident in Social Security being around through their retirement years. Those older than 75 were the most likely to be "very confident."
Social Security helps, but retirees are still struggling with inflation
With more than 70% of respondents saying that they rely on Social Security payments "a lot" or "completely," and 85% saying that inflation is stretching their budget, it's little wonder that most of them don't think the 8.7% cost-of-living adjustment is enough.
The results of The Motley Fool's survey reiterate two points that are worth repeating here. First, the gender wage gap continues through retirement, and second, it's crucial to begin retirement planning early to ensure that factors such as inflation or problems with Social Security benefits don't have disastrous financial consequences.
Methodology
The Motley Fool distributed this survey to 750 retired Americans via Pollfish on Nov. 1, 2022.
Of the respondents, 58% were women and 42% were men.
