As retirement approaches, many baby boomers are facing financial insecurity. Congress has been deliberating for a long time over potential cuts to Social Security programs, which could have significant implications for the benefits and services that many boomers rely on.
With the future of Social Security hanging in the balance, it is more crucial than ever to familiarize oneself with these proposed changes and formulate a well-thought-out plan for the future. Here is what you should know:
Social Security Cuts
It is no secret that Social Security is grappling with a looming financial crisis. If no action is taken, the trust funds from which Social Security draws will be exhausted within the next decade, leaving insufficient funds to pay retirees their full benefits.
According to Joe Allaria, a partner at CarsonAllaria Wealth Management and host of “The Retirement Power Hour,” the most recent Social Security Trustees report indicates that the OASI and HI asset reserve funds are on course to be depleted by 2033. At that juncture, Social Security will only be able to cover 77% of scheduled benefits until 2097.
Allaria notes that while the prospect of a uniform 23% reduction in benefits across the board is improbable, procrastination in addressing this pressing issue will exacerbate the challenge of bridging the financial gap.
Several potential solutions are under discussion to tackle this issue, including reducing Social Security benefits or increasing the full retirement age. While raising the full retirement age may not affect most baby boomers, reduced benefits could have a tangible impact, especially for those already at or nearing retirement. It is crucial to emphasize that no definitive decisions have been made at this juncture, and all cuts or adjustments to Social Security remain in the realm of proposals.
Cost of Living Adjustment (COLA)
Though not a cut in itself, the Cost of Living Adjustment (COLA) significantly influences the income received by Social Security beneficiaries. Each year, Social Security adjusts its benefits in accordance with the COLA, which is based on the Consumer Price Index’s measure of changes in the cost of living. The COLA for 2024 is set at 3.2%, while the COLA for 2024 was a substantial 8.7%, marking the most significant increase since 1981.
The COLA calculation hinges on inflation in the third quarter of the preceding year (July, August, and September). This year’s calculation reflects the high inflation witnessed in the initial two quarters, followed by a slowdown in the third quarter due to Federal Reserve rate adjustments. However, some individuals may have accrued debt during the rapid inflation periods, and a smaller COLA increase may hinder retirees from paying down this accumulated debt. The 3.2% increase may struggle to keep pace with current and future inflation trends.
Programs and Services for Baby Boomers
For those grappling with financial challenges in retirement, several programs and services offer potential relief across various aspects of life, including food, medical expenses, and employment.
Supplemental Nutrition Assistance Program (SNAP)
The Supplemental Nutrition Assistance Program (SNAP) extends food benefits to low-income Americans to supplement their grocery budgets. The eligibility of applicants is based on their assets and income. Families with elderly or disabled members must meet the net income limit, calculated as gross income minus allowable deductions.
From October 1, 2024, to September 30, 2024, SNAP’s net monthly income limit stands at $1,215 for a one-person household or $1,644 for a two-person household. If eligible, beneficiaries receive SNAP benefits on an Electronic Benefits Transfer (EBT) card, functioning like a debit card. Each month, these benefits are automatically credited to the EBT card, allowing recipients to purchase groceries at authorized food retailers.
Commodity Supplemental Food Program (CSFP)
CSFP, which is administered by the U.S. Department of Agriculture, offers monthly food packages to certain low-income individuals aged 60 and above. These packages contain various essential items, including vegetables, fruits, cheeses, grains, protein, milk, and more.
Medicare Savings Programs
The Medicare Savings Program is a program that assists eligible beneficiaries in paying their Medicare Part A and B premiums, deductibles, coinsurance, and copayments. Application for these programs is made through the state, with eligibility determined based on income and resources. Four distinct Medicare Savings Programs exist: the Qualified Medicare Beneficiary (QMB) Program, the Specified Low-Income Medicare Beneficiary (SLMB) Program, the Qualifying Individual (QI) Program, and the Qualified Disabled and Working Individual (QDWI) Program.
Senior Community Service Employment Program
For those facing financial challenges in retirement and not classified as disabled, part-time employment may provide supplementary income in the wake of potential Social Security cuts. The U.S. Department of Labor operates the Senior Community Service Employment Program, which offers support for part-time employment and training in community service roles, enabling older workers to transition into unsubsidized positions in the private sector.
Retirement should ideally be a period of relaxation, but financial concerns can introduce unwanted stress. If you are grappling with financial burdens during retirement, consider exploring the programs mentioned above and services, as they may offer relief from some of the economic challenges you may face.