By now, you've probably heard that the Social Security cost-of-living adjustment (COLA) for 2024 is 3.2%. It might not sound like much, but it's actually above average. The typical retired worker will see their checks rise by $59 per month, and some will get much more.
But for many, this boost might fall short of what they need to cover their expenses next year. Below, we'll take a look at why, and what seniors can do if they're worried about making ends meet.
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How Social Security COLAs are calculated
The whole idea of a Social Security COLA is to help seniors' checks keep pace with rising costs, so it makes sense that the government bases its COLAs on the rate of inflation. More specifically, it looks at the percent change in third-quarter pricing data from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This gives the price for a bundle of common goods and services many of today's workers use.
On the face of it, this makes sense -- until you learn that there's a Consumer Price Index for the Elderly (CPI-E) that many argue better reflects the spending habits of seniors 62 and older. Had the government used this to calculate Social Security COLAs instead, the average senior would've taken home an extra $3,787.80 over the past 10 years, according to the Senior Citizens League. It found that calculating COLAs using the CPI-E nearly always resulted in a higher COLA than the current CPI-W method.
Social Security benefits have lost approximately 36% of their buying power since 2000, according to the Senior Citizens League, and this trend will likely continue. Though there are those in government calling for a change to COLA calculations, there doesn't appear to be any movement on this issue right now.
One possible reason for this is Social Security's solvency crisis. The most recent estimates indicate that Social Security's trust funds will be depleted in 2034. After this date, it will only be able to pay out about 80% of scheduled benefits moving forward -- unless the government takes steps to increase the program's funding.
So while shifting to the CPI-E for COLA calculations would benefit seniors in the long term, it could exacerbate this funding issue. With no plan currently in place to ensure Social Security's longevity, larger COLAs could just move up the timeline for benefit cuts. That could hurt seniors even more in the long run.
For now, we can only wait to see how the government will address Social Security's solvency issues and whether it will make changes to COLA calculations at that time. Until then, it's up to each beneficiary to figure out how to make their checks go as far as possible.
How seniors can supplement their Social Security checks
Ideally, seniors would have a large nest egg they could use to supplement their Social Security checks, but many don't. Those still working can rely upon their job's income to help them cover their living costs. Reducing spending might also be an option for some families.
But when those things aren't possible or sufficient, you may have to explore what other types of government benefits you may qualify for. Supplemental security income (SSI) is a good one for seniors to look into.
These benefits are available to low-income adults 65 and older, and to blind and disabled people. The Social Security Administration pays these checks monthly. The maximum federal SSI benefit in 2024 is $943 per month for an individual and $1,415 per month for a couple. Many states throw in an additional benefit on top of this. But the actual amount you'll receive depends on your household income and resources.
Seniors can also look into the Supplemental Nutrition Assistance Program (SNAP), the Senior Farmers' Market Nutrition Program (SFMNP), or the Commodity Supplemental Food Program (CSFP) for grocery assistance, or Medicaid for healthcare assistance. Those who aren't eligible for Medicaid or health insurance through a job could also look into purchasing a policy under the Affordable Care Act.
Check with your state and local government as well for assistance with other essential costs, like utilities and housing. Keep in mind that each program has its own eligibility requirements, and it can take time for the programs to review your application.
It's ultimately up to each person to figure out a strategy that will work for them going forward. If you haven't already, you should receive a COLA notice this month listing your new Social Security benefit for 2024. Once you have this, you can begin to plan your budget for next year.
