Social Security COLA Isn’t Enough To Live On
Millions of retirees depend on Social Security as their primary lifeline, but next year's cost-of-living adjustment may leave them far behind surging energy and food prices before the calendar even turns to February.
This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.
Next year’s Social Security cost-of-living increase looks like it will be 3.6%. The AARP made this forecast. The real figure will be released on October 14. It is based, according to The New York Times, on “the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W. It averages the figures for July, August, and September. That may be fine for people who have a lot of money. For those who don’t, it’s a problem.
Most of the conversation about Social Security is that it will “run out of money”.That happens in late 2032. It really doesn’t run out. The payout drops to about 79% of the current total.
People choose one of three options. Social Security defines them as “early eligibility,” which can start at 62. “Retirement” age is 65. People can get the largest payout possible if they wait until age 70.
Analysts have proposed several ways to “save” Social Security. Among those is to add two years to three retirement options. Another is to raise the wage level cap when people pay in. Today, for most people, that is $184,500 a year. The most controversial idea is that people who make a great deal of money after they retire should pay little, or nothing.
Is 3.6% enough? Almost certainly not. Over the next year, the CPI could surge. Energy prices will be a factor. So will food. And food prices are affected by energy prices. Seventy percent of all Us freight is moved by truck. Diesel is at its highest price ever. Some of that will be passed on to consumers next year.
The 3.6% COLA hits the low-income recipients hardest. Fourteen percent of people who have retired rely on 90% or more of their retirement income, according to Investopedia. If Social Security payments do drop to 79% of current total, many of these people will be driven close to the poverty level or below it. The Center on Budget and Policy Priorities reports, “Without Social Security, 23.5 million more adults and children in the United States (including Puerto Rico) would be below the poverty line, according to our analysis of survey data for 2024 using the official poverty measure (OPM).”
Is 3.6% enough for many people? Not if the price of energy and food skyrockets.
Contact [email protected] for any questions or corrections.
Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.
McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.
His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.
A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.
TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.
McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.
