CNN –
Social Security recipients will receive an annual cost of living adjustment of 3.2% for 2024, a much smaller increase than the inflation-related increases of the past two years, the Social Security Administration announced Thursday.
Starting in January, retirees’ monthly payments will increase by $59 to an average of $1,907.
The smaller adjustment reflects the fact that inflation has moderated this year. Recipients had received increases of 8.7% for 2023 and 5.9% for last year, the highest since the early 1980s.
“It’s a small amount, but it provides some cushion,” said Mary Johnson, a Social Security policy analyst at The Senior Citizens League, an advocacy group. “We are hopeful that it will be more affordable.”
The increase remains well above the average of the last two decades, which is 2.6%, she said. The annual adjustment is based on an August-October inflation measure that has cooled after hitting about a four-decade high a year ago.
A related measure, the consumer price index, rose 3.7% in September from a year earlier, the Bureau of Labor Statistics said Thursday.
Although the rate of increase has slowed, prices remain high.
Although the annual adjustment is aimed at helping the more than 71 million recipients of Social Security and Social Security benefits cope with rising prices, benefits have not kept pace in years. Many older Americans rely heavily on their monthly payments to cover their living expenses.
Inflation has caused Social Security payments to lose 36% of their purchasing power since 2000, according to a study released earlier this year by the Senior Citizens League. To maintain the same level of purchasing power as in 2000, monthly benefits would need to be increased by $517.
Tom and Susan Freyer of Palmdale, California, are feeling the pinch. The couple, who rely largely on Social Security and their small teacher’s pension, were able to put aside enough money five years ago to celebrate their anniversary with a weekend in Newport Beach. That’s out of the question this year.
“The money is gone,” said Tom Freyer, 72, who worked in advertising. “The money ends up in the gas tank. It goes towards the grocery bill.”
The 8.7% increase in their monthly benefits for this year has helped, but is not enough to cover the higher costs of medications and homeowners association dues, as well as gas and groceries. Tom Freyer has started writing screenplays in hopes of making some extra money, although the recent writers’ strike has temporarily put his efforts on hold. If he can’t sell one soon, he figures he’ll have to get a job.
“If a disaster were to strike us, another medical emergency, or my daughter was in crisis or something like that, we would be devastated,” said Freyer, who was battling cancer until recently.
Some advocates want the annual benefit increase to be tied to an experimental index that measures senior inflation, rather than the current metric that reflects price changes for urban wage earners and office workers. The former puts more emphasis on cost increases in health care, which accounts for a much larger share of older people’s spending.
Nancy Portz, a widow who lives in Sun City Center, Florida, agrees. As she grew older, her health deteriorated, leading to higher medical bills.
“It’s really hard to plan for this unless you’re doing very well financially,” said Portz, 74, a retired special education teacher and attorney who represented child abuse victims. “In this country, it is shameful that we pay so much for medicine and medical care.”
These expenses reduce her monthly Social Security payment and make it difficult for her to afford other essentials, including food. As a vegetarian, she was shocked to recently find out that a single red pepper cost $2.
“If you want to buy healthy food, it’s a fortune now,” said Portz, whose electric bill has more than tripled and her water bill has about doubled since 2016, when she bought her small home in the retirement community. “It just seems to keep going higher and higher.”
Social Security recipients must also factor in their Medicare Part B premiums, which are automatically deducted from their monthly benefits. The Centers for Medicare and Medicaid Services has not yet announced 2024 premiums.
This year, standard monthly premiums are $164.90, a decrease of $5.20 from 2022, when premiums rose sharply.
Steep annual benefit increases could end up hurting some seniors by allowing them to exceed thresholds for certain federal assistance programs such as food stamps, Medicaid and rental assistance. “Significant numbers” of older, lower-income Americans have lost access to some of these safety net programs in the last year, according to surveys by the Senior Citizens League.
Carl Brown, 70, who lives in public housing in New York City, knows this all too well. His rent is tied to his income and will increase by $74 per month starting in November due to the increase in his Social Security benefits. This will make it even more difficult for him to pay his medical and grocery bills, and he will also have to contend with higher interest rates on his credit card debt.
He doesn’t think the 2024 adjustment will help all that much.
“My income doesn’t leave me with much left after paying bills and buying groceries,” said Brown, who worked as a customer service representative and is divorced. “I don’t know if I’ll ever have enough.”
This story has been updated with additional reporting.