As October approaches, retirees are becoming more aware of the possibility that they will not receive the COLA raise they were hoping for. The Social Security cost-of-living raise won’t be made public until October, but predictions made in June were a little higher than those made in July based on the consumer price index (CPI).
It is important to keep in mind that the estimate has only gone down by 1%, from 2.7% to 2.6%. However, seniors are still having to deal with price increases on the things they buy most often, like rent, electricity, and medical care.
The cost of living adjustment increase for 2024 was 3.2%, which was about $59 more per month on average. This increase was not enough to reflect the real cost of living raises that Americans had over the previous year. The small COLA increases each year mean that more and more retirees have to depend on their own savings to cover the shortfall. Many are looking for new ways to keep their retirement savings safe so that they don’t have to go back to work when they retire.
5 reasons to supplement your Social Security checks due to the new COLA increase
Medical costs in the US are unpredictable
From gas prices to Florida’s real estate market, most of the financial parts of retirement are hard to guess. But medical costs, which take up a big chunk of seniors’ funds, are one of the hardest things to plan for.
Before COVID-19 made seniors much more likely to have major health problems, in 2018 alone, half of all retirees spent $4,300 a year on medical costs, even though Medicare helped cover some of those costs. Also, Fidelity Investments thinks that starting in 2023, the average cost of medical bills in retirement will be more than the $157,500 limit set by Medicare.
Medicare does not cover long-term care institutions
Almost all adults will need long-term care at some point in their lives, whether it’s because they are old, have a long-term illness, are disabled, or are still recovering from major surgery. In other words, 70% of people aged 65 and up will need long-term care at some point in their lives.
Long-term care, on the other hand, is not covered by Medicare. This means that you will either have to pay for a long-term stay out of your own cash or get long-term care insurance. You can’t be sure when or if you’ll need long-term care, but if you do, your Social Security payments probably won’t cover the whole cost.
Social Security benefits can’t keep up with inflation
Every year, the SSA looks at Social Security payments to see if they should be raised to keep up with the cost of living. The answer is yes most of the time. Cost-of-living adjustments (COLAs) may help seniors who are having a hard time with money a little, but your monthly payment shouldn’t go up as much as the cost of things normally does.
In 2023, Social Security got a COLA raise of 8.7%, which was the biggest in forty years. But prices were 9.1% higher in June 2022 than they were in June 2021. In 2024, COLA earnings went up 3.2%, but prices overall went up 4.1%. When the COLA went up by 8.7%, seniors were still able to better handle their money, but the difference between that amount and the country’s inflation rate kept growing.
The Social Security Trust Fund might be depleted in 2034
The Social Security Administration has had a surplus for many years. This means that extra money has been put into a trust fund to be used to boost what workers have paid into the system. But that extra money should be gone by 2034.
You don’t need to worry about the program running out of money because payments will still be paid as long as people keep paying into Social Security. When the extra money runs out, though, payouts may go down or the government may change the program in some other way.
Prices may fluctuate suddenly
As we saw in 2008 and 2022, the prices of things can change very quickly. Social Security benefits, on the other hand, don’t change. In February 2022, benefits will be the same as they were in June due to inflation, though they may go up in January due to COLA changes.
Also, price increases may not have been as big as they were the year before, but they are still going up faster than set earnings with COLA increases. The average cost of goods is going up faster than the COLA, but retirees who count on Social Security and don’t have any savings or other income sources have to live off of their fixed income.