Social Security benefits are increasing in 2024 -- but more than half of older Americans worry their retirement income won't be enough to cover essentials. What the experts say must change

Serah Louis
Social Security benefits are increasing in 2024 -- but more than half of older Americans worry their retirement income won't be enough to cover essentials. What the experts say must change
Social Security benefits are increasing in 2024 -- but more than half of older Americans worry their retirement income won't be enough to cover essentials. What the experts say must change

Older Americans who feel the strain of high prices may welcome the modest boost to their Social Security benefits coming in 2024. But unfortunately, it might not provide much relief.

The Social Security Administration (SSA) announced on Oct. 12 that the Social Security cost-of-living adjustment (COLA) will be 3.2% in 2024 — a much smaller figure than last year’s 8.7% COLA thanks to moderating inflation.

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Beneficiaries will see their monthly payments increase by more than $50 on average, according to the SSA, starting in January.

The new COLA is well above the 2.6% average over the past two decades, but many older Americans aren’t convinced it’s enough — with a new survey from The Senior Citizens League (TSCL) revealing 56% of respondents worry their retirement income won’t cover the cost of essentials in the coming months.

“The older consumer’s dollar buys less than it did just a few years ago,” Mary Johnson, Social Security and Medicare policy analyst at TSCL, told Moneywise in an email.

Here’s why older Americans are concerned.

Climbing costs

Even though inflation is cooling, the majority of survey respondents reported their household expenses are still 10% higher than last year.

The three biggest spending categories for seniors, Johnson says, are housing (including heating and cooling), medical costs and food.

“The Social Security benefits are modest, only replacing about 30% of one's earnings during working years,” Johnson said.

She points to costs such as rent, health care and home and auto insurance, which she says often go up but rarely come back down.

“When this happens, the buying power of Social Security benefits erodes.”

Low-income Americans especially impacted

Earlier this year, federal emergency COVID assistance for the Supplemental Nutrition Assistance Program (SNAP) ended, putting millions of lower-income Americans at risk, with each person receiving benefits getting about $90 a month less on average, according to the Center on Budget and Policy Priorities.

This includes many older individuals who are now among the fastest-growing segment of America’s homeless population.

Inflated prices led to inflated COLAs, which many Social Security beneficiaries have appreciated over COVID-19. However, it means some low-income recipients are now being taxed on their benefits for the first time.

Depending on their income threshold, older Americans are taxed on up to 85% of their Social Security benefits. The SCL expects even more beneficiaries will end up owing the government come tax time thanks to this year's supersized COLAs.

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What needs to change?

The Social Security taxation thresholds were set way back in 1984 and haven’t been adjusted for inflation. The SCL advocates for updating the numbers to today’s dollars — for example, the minimum individual income threshold would nearly triple from $25,000 to over $74,000.

The issue remains that the tax revenue is a major source of funding for both the Social Security and Medicare programs. The Social Security Trust fund is projected to receive $840 billion in tax revenues from 2023 to 2032, according to TSCL — but the SSA says it will run low by 2033, meaning recipients will begin to receive only about 77% of their benefits.

Johnson points out that Social Security is partially financed by a payroll tax, with workers paying taxes on 6.2% of their wages, up to $160,200 as of 2023.

Earlier this year, Congressman John Larson (D-CT) proposed legislation that would modestly increase Social Security taxes paid by higher-wage earners and raise the minimum thresholds at which Social Security is taxed to $35,000 for individuals and $50,000 for couples.

The bill would also change how the COLA is determined. Currently, the COLA is calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) — which does not survey the costs of retired households over the age of 62.

Larson recommends using either the CPI-W or the Consumer Price Index for Americans 62 years of age and older (CPI-E) to calculate the COLA, depending on whichever measure is higher.

Johnson released an analysis detailing how this would boost benefits, providing more protection against inflation and greater benefit growth over time.

By using the CPI-E instead of the CPI-W for next year, seniors would receive a 4% COLA instead — nearly a percentage point higher than what the SSA announced.

Johnson’s analysis also found that using the higher of the two benefits over the last decade would have provided an extra $3,787.80 more to seniors from 2014 through the end of 2024.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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