Dealing with the Social Security cost of living adjustment (COLA) has proven difficult for some seniors.Some people’s circumstances are so dire that many of them are considering returning to work in order to supplement their income.
The Motley Fool conducted a survey of 2,000 American retirees in October, immediately following the announcement of the COLA. The findings were concerning: in order to increase their income, half of them are considering abandoning retirement.
Since finding part-time, flexible work can be a terrific way to make more money, acquire better health insurance, and meet more people to avoid being lonely, it’s frequently recommended to seniors who inquire how they might boost their retirement funds. However, the 50% rate is concerning.
Naturally, the COLA was extremely low at 2.5 percent, and many seniors who are already struggling to make ends meet will not benefit from it. One of the main reasons is that it is based on the average for the same period last year and the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the third quarter of this year.
This index doesn’t accurately reflect how much seniors must pay because it is biased toward younger workers rather than the elderly. The CPI-E, which uses the same data but is targeted at those 62 and older, might be a better option.
This disparity in lifestyle is a major factor in the 54% of retirees who believe that the most recent COLA is insufficient, particularly when contrasted with the 8.7% who felt the same way in 2023 and the 3.24% who felt the same way in 2024.
Even if many people are aware that a lower COLA is a good thing, this is nonetheless the case. After the 3.2 percent COLA, the average monthly Social Security payment in 2024 will be $1,907, according to Jack Caporal, research lead at The Motley Fool. That is less than half of the $5,070 monthly expenditures of those aged 65 and over in 2023.
It’s hardly surprising that many seniors surveyed believe they need an additional source of income, when only 54% of American households have a retirement account in 2022.
Social Security payouts were expected to cover 40% of seniors’ expenses, so it shouldn’t be too difficult for them to make ends meet.
However, the reality is that many older Americans rely solely on their benefits; according to at least 28% of those surveyed, they could not survive without them. More than half of those surveyed—an additional 32%—rely heavily on their payments.
According to Caporal, there are a variety of reasons why retirees would wish to return to the workforce, including helping a charity or other cause, feeling like they have a purpose in life, and adding structure to their days. However, according to the survey’s findings, retirees who are considering changing careers want to ensure they have enough money to maintain their current standard of living.
The true problem of the effect of a low COLA on Social Security benefits
The older persons League (TSCL), a nonpartisan organization, strives to defend older persons’ rights. One of their primary arguments is that, on average, Social Security benefits in 2024 will only be valued around 80 cents on the dollar when compared to 2010.
This indicates that seniors are losing their purchasing power despite the changes. They are among the most ardent proponents of the CPI-E as a metric.
“This year is another lost opportunity to provide seniors with the financial relief they deserve by changing the COLA calculation from the CPI-W to the CPI-E, which would better reflect how seniors’ costs are changing,” says Shannon Benton, executive director of TSCL. In order for Americans to retire with dignity, seniors and TSCL encourage Congress to take immediate action to enhance COLAs.
For instance, they want the CPI-W to be used to determine COLAs rather than the CPI-E, and they demand a minimum COLA of 3%. Sixty-seven percent of seniors rely on Social Security for more than half of their income, and sixty-two percent worry that they won’t have enough money in retirement to pay for necessities like food and medical expenses.
See Also: Social Security Officially Notifies Retirees of a Significant New Notice Regarding Their Social Security Check in December
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