An increase in the cost-of-living adjustments (COLA) is still not enough for most retirees, especially with the increase in healthcare costs.
As COLA increased for retirees, other expenses such as healthcare also increased leaving them still struggling. (Photo: CNET)
The Effect Of The Cost-Of-Living Adjustment (COLA) Increase
Social Security retirees rely heavily on their monthly checks from the cost-of-living adjustment or COLA to cover their expenses. The annual cost-of-living adjustment (COLA) is an important event for them, as it determines the increase in their benefits to account for inflation.
The cost-of-living adjustment (COLA) is determined based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This year, the Social Security Administration announced a cost-of-living adjustment (COLA) of 3.2% for 2024, which is higher than the average over the past 20 years.
However, the purchasing power of Social Security dollars has been declining for years, as the increase in benefits has not kept up with the rising costs of goods and services that retirees typically purchase. Additionally, Medicare Part B premiums are expected to increase by nearly 6% in 2024, offsetting some of the cost-of-living adjustment (COLA) increase.
Moreover, a growing number of retirees may face taxes on their Social Security benefits, as the income thresholds for taxation have not been adjusted for inflation since their introduction in the 1980s and 1990s.
According to a published article by The Motley Fool, retirees are still facing financial challenges despite the cost-of-living adjustment (COLA) increase.
Higher Healthcare Costs
In a published article by USA Today, the biggest expense for seniors is healthcare, and even after factoring in the COLA increase. When accounting for other expenses like housing, food, gas, and utilities, seniors often find themselves in a difficult financial situation.
Poverty among Americans aged 65 and older has been increasing, and many seniors do not have enough savings to cover the extra costs each year. Cost-saving measures for healthcare, like price negotiations with pharmaceutical companies and the out-of-pocket spending cap, are not expected to provide relief for several years.
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