As we enter 2024, retirees across the United States face a critical question: Will the latest Social Security Cost-of-Living Adjustment (COLA) be enough to meet their rising expenses? The answer is leaning towards a concerning ‘no.’
The Reality of the 2024 COLA Increase
Starting January 2024, over 66 million Social Security beneficiaries will receive a 3.2% COLA. This adjustment, which translates to an average increase of over $50 per month, is designed to help Americans keep pace with inflation and maintain their standard of living. However, more is needed for many, especially considering the escalating healthcare costs, housing, food, gas, and utilities.
Take the example of Lou Scrivani, a 76-year-old retired staffing company executive. The monthly COLA increase amounts to approximately $135 for him and his wife. But when they account for the increases in Medicare Part B, drug plans, and Medicare supplements, they are left with only about $53.60. This amount is further diminished by the rising deductible on their drug plan, effectively nullifying the COLA increase.
The Growing Financial Strain on Seniors
This situation is not unique to the Scrivanis. Many seniors find that rising healthcare costs quickly absorb increased Social Security benefits. The situation is exacerbated when considering other essential expenses like housing and utilities. This financial strain is reflected in the increasing poverty rates among Americans aged 65 and older, which rose to 14.1% in 2024.
The Challenge of Healthcare Costs
Healthcare remains the most significant expense for older adults. Despite some cost-saving measures introduced by the Inflation Reduction Act, most will take effect after some time. For instance, the $35 monthly cap on out-of-pocket insulin costs and free recommended adult vaccines for Medicare Part D participants are already in effect. Still, measures like the cap on annual prescription drug out-of-pocket costs won’t be implemented until 2025.
Coping Strategies for Seniors
In the face of these challenges, seniors are adopting various strategies to stretch their healthcare dollars. Some are turning to Canadian pharmacies for more affordable medication. For example, Scrivani significantly reduced his medication costs by ordering from a Canadian pharmacy, where he pays $49 monthly compared to $550 monthly in the U.S.
Planning for Future Healthcare Needs
Financial experts emphasize the importance of early financial planning. According to Morgan D. Hill, CEO of Hill & Hill Financial, retirees should plan for a third of their income for medical costs. This foresight can help mitigate the impact of rising healthcare expenses in later years.
Available Resources for Seniors
Resources are available for those already in their retirement years to help manage these financial challenges. Websites like BenefitsCheckUp.org offer assistance in finding local programs for various needs, including food, medicine, and utilities. Additionally, State Health Insurance Assistance Programs can guide Medicare and Medicaid.
The Bottom Line
While helpful, the 2024 Social Security COLA increase needs to fully address the financial needs of retirees, particularly in the face of soaring healthcare costs. Seniors must explore all available resources and plan strategically for their healthcare expenses. As we navigate these challenging times, being informed and proactive about financial planning is more critical than ever for a secure and comfortable retirement.