Living on Social Security alone is far from an optimal situation. Those benefits only replace about 40% of a typical worker's preretirement wages. And most seniors need roughly twice that sum to live comfortably.
But for better or worse, the reality is that many seniors today do, in fact, live only on Social Security. And people in that boat need to stretch their benefits as much as possible.
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This year, Social Security recipients saw their monthly benefits rise 3.2% in January. And while that 3.2% raise isn't as generous as the previous year's cost-of-living adjustment (COLA), it's a decent boost nonetheless.
At this point, you've likely gotten your first COLA for the year. In light of that, here are a couple of essential moves to make.
1. See how much extra money you have to spend
Your Social Security benefits may have been eligible for a 3.2% COLA to start off the year. But that doesn't automatically mean you got your full raise.
If you're a Medicare enrollee, an increase in the cost of Part B may have eaten into your COLA. But either way, see how much larger your monthly Social Security check is now compared to last year, and then figure out if there are expenses you've been putting off that that money should go toward.
Maybe you've been delaying a medical test because you've been worried about footing your share of the bill. If you now have a little extra money to work with, you may be in a position to move forward.
Similarly, think about your home and vehicle. If you've been delaying maintenance or small repairs, your COLA might help.
2. Bank the extra money you don't need
Maybe you don't have a pressing need for your Social Security COLA. In that case, take the extra money from your benefit payments and bank it. You never know when a larger expense might arise, so it's good to pad your cash reserves while you can.
Also, if inflation cools off even more this year than last year, your 2025 COLA may be pretty small. So you might as well take advantage of your raise while you can.
Try to be less reliant on Social Security
Being in a position where you're reliant on a Social Security COLA to cover expenses isn't ideal. If you're still working, it's an excellent idea to do what you can to build up a nest egg -- even if it's a modest one. That way, if there's a year when you don't get a Social Security raise at all, you won't necessarily wind up in panic mode.
But if that ship has sailed, at least do what you can to make the most of your 2024 COLA. And also, if your health allows for it, consider some type of part-time work. Earnings from a job could do a lot more good for your finances than a modest lift in your Social Security benefits. And thanks to the gig economy, there's a world of flexibility in the context of working as a retiree.
