The Social Security Administration announced Thursday that the cost of living for Social Security recipients will be adjusted by 3.2% annually through 2024, a much smaller increase than the inflation-driven growth of the past two years.
Starting in January, retirees’ monthly payments will increase by $59, to an average of $1,907.
The lower adjustment reflects the fact that inflation has slowed this year. Recipient amounts increased by 8.7% and 5.9% respectively in 2023 and last year, the largest increases since the early 1980s.
“It’s a small amount, but it provides some cushion,” said Mary Johnson, a Social Security policy analyst at the advocacy group Senior Citizens Alliance. “We’re hoping things will become more affordable.”
She said the increase was still well above the average of the past two decades (2.6%). The annual adjustment is based on a gauge of inflation from August to October, which has cooled after reaching a four-decade high a year ago.
The U.S. Bureau of Labor Statistics announced Thursday that the consumer price index, a related indicator, rose 3.7% in September compared with the same period last year.
Still, despite the slowdown in growth rates, prices remain high.
Although the annual adjustment is intended to help the more than 71 million recipients of Social Security and Supplemental Security Income benefits cope with rising prices, benefits have not actually kept pace for years. Many older Americans rely heavily on monthly payments to cover living expenses.
Inflation has caused a 36% decline in the purchasing power of Social Security payments since 2000, according to a study released earlier this year by the Alliance for Seniors. Monthly benefits would have to increase by $517 to maintain the same level of purchasing power as in 2000.
Tom and Susan Freer of Palmdale, Calif., are feeling the pinch. The couple, who live primarily on Social Security and her small teacher’s pension, were able to set aside enough funds five years ago to celebrate their anniversary with a weekend in Newport Beach. This year that’s not possible.
“The money is gone,” said Tom Freyer, 72, an advertising man. “That money goes into the gas tank. That money will go on the grocery bill.”
An 8.7% increase in monthly benefits this year helps, but it’s not enough to cover higher drug costs and homeowners’ association fees, as well as gas and groceries. Tom Freire began writing the screenplay in hopes of making some extra money, but the recent writers’ strike put his efforts on hold. If he couldn’t sell one soon, he figured he’d have to find a job.
“If we had a disaster, another medical emergency, or my daughter was in crisis or something like that, we would be hit,” said Freyer, who until recently was battling cancer.
Some advocates would like to see annual benefit increases tied to an experimental index measuring the inflation experienced by seniors rather than to the current index, which reflects price changes for urban wage earners and clerical workers. The former places greater emphasis on the rising costs of health care, which accounts for a much larger share of seniors’ spending.
Nancy Portz, a widow who lives in Sun City Center, Florida, agrees. As she got older, her health deteriorated, which cost her more medical bills.
“Unless you’re in a very good financial position, it’s hard to plan for this,” said Portez, 74, a retired special education teacher and attorney who represents child abuse victims. “It’s disgraceful that we pay so much for drugs and health care in this country.”
The expenses drained her monthly Social Security payment and made it harder for her to afford other necessities, including food. As a vegetarian, she was recently surprised to find a red bell pepper on sale for $2.
“If you want to buy healthy food, this is a great time,” Portez said. Since buying her tiny home in a retirement community in 2016, her electric bill has more than tripled and her water bill has roughly doubled. “It just seems to keep going up, up, up.”
Social Security recipients must also consider their Medicare Part B premium, which is automatically deducted from their monthly benefit. The Centers for Medicare and Medicaid Services has not yet released 2024 premiums.
This year, the standard monthly premium is $164.90, which is $5.20 less than in 2022, when premiums will increase significantly.
Large annual benefit increases could ultimately hurt some seniors because it could push them over the threshold for some government assistance programs, such as food stamps, Medicaid and rental assistance. A “large number” of low-income older Americans were denied access to some of these safety net programs last year, according to a survey conducted by the Alliance for Seniors.
Carl Brown, 70, who lives in public housing in New York City, knows this first-hand. His rent is tied to his income, rising by $74 a month starting in November due to an increase in his Social Security benefits. This will make it harder for him to pay his medical and grocery bills, as well as higher interest rates on his credit card debt.
He doesn’t think adjustments in 2024 will be of much help.
“Besides paying bills and buying groceries, I had very little income left,” said Brown, a former customer service representative who is divorced. “I don’t know if I’ll ever have enough.”
This story has been updated with additional reporting.