In early 2023, seniors on Social Security saw their benefits rise 8.7%. That was the largest cost-of-living adjustment, or COLA, to come down the pike in decades.
But next year's COLA isn't shaping up to be as generous. And there's a good reason for that.
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Social Security COLAs are based on inflation. In 2022, rampant inflation wreaked havoc on consumers, forcing many seniors on fixed incomes to cut back on essentials in order to avoid plunging into debt. And for some, debt was still unavoidable.
Although inflation is still a problem, it's not nearly as out of control as it was in 2022. As such, consumers of all ages are finally getting some relief in paying everyday bills. But cooling inflation is also setting the stage for a much smaller COLA in 2024.
Based on the most recent inflation data available, the nonpartisan Senior Citizens League is estimating that Social Security recipients will get a 3.2% COLA in 2024. That number still has the potential to shift because COLAs are based on third-quarter inflation data, and we won't have an exact read on that until September wraps up.
But all told, seniors should expect a 2024 COLA that's substantially lower than 2023's. If you feel that will be a problem for you, here are some options for compensating.
1. Pick up part-time work
It's not uncommon for seniors to hold down a job even once their careers have wrapped up. And thanks to the gig economy, you're not necessarily stuck working retail or having to report to a building at preset hours.
You could drive for a ride-hailing service, sign up to pet-sit, or teach music a few hours a week if you're proficient at an instrument. The added income could work wonders for your finances, and the added structure to your routine could be beneficial to your mental health.
2. Monetize your home
For many seniors, their home is their greatest financial asset. But you don't need to sell your home or borrow against its equity to improve your financial situation.
Instead, you could rent out a portion of your home to generate income and supplement your Social Security benefits. And if you don't want a full-time tenant, rent out your home on a temporary basis during periods when you're scheduled to be away.
3. Consider relocating
Relocating is a huge deal. And it's not necessarily an easy thing to do later in life.
But one thing you should realize about Social Security COLAs is that a boost in the 3.2% range is actually pretty generous, historically speaking. So if you've been struggling to get by, in general, it could pay to move to a part of the country where your Social Security income can go further.
We won't know exactly what Social Security's 2024 COLA will look like for about another month. But either way, it's apt to be considerably smaller than the boost seniors got in 2023. If you're worried about your ability to manage your bills in light of that, it definitely pays to look into options that allow you to generate more income or lower your cost of living, in general.
