(Bloomberg) — A 3.2% increase in Social Security benefits to help offset inflation is welcome news, but won’t bring big sighs of relief among the more than 71 million Americans receiving the monthly benefits check.
The 2024 cost-of-of living adjustment announced on Wednesday, represents a third year of above-average increases. But the bump pales in comparison to 2023’s 8.7%. It amounts to, on average, another $50 or so a month, bringing the average Social Security check for all retired workers to $1,907 in the coming year.
Still, anything to combat the relentless financial pressure from inflation is welcome.
“For a very high percentage of people, Social Security is their only income, and the cost-of-living adjustment is one of the only forms of inflation protection we have,” said Mary Johnson, Social Security and Medicare analyst for the bipartisan Senior Citizens League. “Even if it’s a smaller adjustment than we’d like, it’s an adjustment, and other sources of retirement income from, say, a 401(k) or a pension, are not always adjusted for inflation.”
A Senior Citizens League survey of 2,258 members in September found 68% of respondents said household expenses remained at least 10% higher than they were a year ago, even with the rate of inflation slowing.
The annual adjustment reflects the change in the Consumer Price Index for Wage Earners and Clerical Workers, a measure called the CPI-W, and is based on the change in average inflation figures for the third quarter of 2023 compared with the same period a year ago.
Just how far the inflation bump will go largely depends on how much Medicare Part B premiums rise. Those premiums are typically deducted from Social Security benefit checks. And in some years, higher Medicare premiums have eaten up any benefit from the inflation adjustment.
In a March report, the Medicare Trustees estimated that the standard Medicare B premium in 2024 would be $174.80, up from $164.90 last year. But that was before a new Alzheimer’s treatment, Leqembi, came under Medicare coverage. Senior Citizens League estimates that could add another $5 per month.
An underwhelming COLA is far from the greatest issue facing retirees on Social Security, however. The program is projected to have a revenue shortfall of about 23% in 2033. By then, the system’s reserves are forecasted to run out and estimated payroll tax revenue flowing into the system is projected to fall short of what’s needed to pay the full level of current benefits. Social Security can’t borrow to cover shortfalls, so changes will have to be made or retirees will face a painful cut.
“In our retirement surveys, there are very high levels of worry about having adequate levels of income in retirement,” said Johnson. “But the rising potential for Social Security cuts is beginning to be the No. 1 concern.”
That makes strategizing about when to collect Social Security benefits even more important, since taking benefits at the earliest possible age — 62 — brings a 30% haircut to the full benefits workers could collect when they reach full retirement age, which is about 67 for many workers.
A Northwestern Mutual study found that 42% of Americans can imagine a future where there is no such program as Social Security. The survey of 2,740 Americans found that baby boomers expect the program to provide 38% of retirement funding, but that Gen Z, Millennials and Gen X expect it to cover 15%, 19% and 27% of financial needs in retirement, respectively.
To contact the author of this story:
Suzanne Woolley in New York at [email protected]