One last one Motley Fool poll found that most retirees see this year’s cost of living adjustment (COLA) by the Social Security Administration as insufficient, with half considering re-entering the workforce because “Social Security does not provide enough income to support their lifestyle. According to the survey, 36% of pensioners found the regulation «completely inadequate», while 27% considered it «somewhat inadequate». The COLA for 2024 was set at 3.2%, down significantly from the nearly 9% increase a year ago.
The survey included responses from 2,000 retirees AMERICAS who began to receive Social Security benefits in 2023 or later. With about 66 million AMERICAS based on Social Security for retirement income, there is growing concern about the sustainability of Social Security trust fund. Without reforms, there are fears that the fund will be depleted, jeopardizing future benefits.
Robert Brokamp, a senior retirement advisor at The Motley Fool, pointed out the discrepancy in how inflation is measured for retirees compared to the general population. «I think there’s a problem with how we measure inflation for retirees versus inflation for the rest of America.»
He noted that while COLA is based on a general basket of goods and services, may not accurately reflect the spending patterns of retirees. «The problem is that this inflation is often based on a large basket of goods and services that don’t necessarily match how most retirees spend their money. For example, COLA it was 3.2 percent [in 2024], but Medicare premiums rose almost 6 percent. So I think there’s a problem with how we measure inflation for retirees versus inflation for the rest of America.»
of COLA mECHANISM, established in 1975, was created to adjust Social Security benefits to combat inflation. Adjustments are based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of last year to the third quarter of the current year. A spokesperson for the Social Security Administration reiterated that COLA adjustments are strictly tied to inflation rates, stating, » COLA is determined by law and is based on the percentage increase in Consumer Price Index for Urban Wage and Clerical Workers (CPI-W) from the third quarter of the previous year in which a COLA was determined for the third quarter of the current year.
Tips for increasing your COLA while receiving Social Security
Brokamp suggested that many retirees considering re-entering the workforce may show a reversal of the «Great Retirement» seen during the COVID-19 pandemic, when many people retired early. He referred to the current trend as «The Great Sabbath,» noting, «Because a lot of these people are realizing that they retired too early. They had a good break, but now they realize they have to go back to work.»
For some retirees, returning to work can also provide mental health benefits and provide the social interaction that many miss after leaving the workforce. With unemployment rates low, there are opportunities for retirees to find flexible, part-time jobs that fit their schedules, offering financial and social benefits. Brokamp continues, «You can find a job that works around your schedule. You work 10 to 20 hours a week, it gives you some extra money, it gives you a little bit of social interaction that a lot of retirees miss. So maybe not it’s a bad idea for some of these people to go back to work for reasons other than financial, but I think part of it is that people probably retired a little earlier than they should have.”
Brokamp emphasized the potential benefits of delay Social Security Claims. “The longer you wait, the bigger your benefit until age 70, because for every year you delay, your benefit increases by about 8 percent. So if you delayed until age 70 and then got it COLAyou got it COLA over a larger amount. So it felt more appropriate.”
Those who wait until 70 to claim benefits receive significantly higher payments, about 8 percent more for each year they delay full retirement age. He noted that pensioners who expressed satisfaction with this year COLA they were overwhelmingly those who had waited until 70 to claim their benefits. According to Brokamp, “The longer you wait, the greater your benefit at age 70; for every year you delay, your benefit increases by about 8 percent. If you claim this early, you get the least benefit. So when you apply a COLA to that little benefit, it just doesn’t feel substantial.”
Consequently, to COLA INCREASES it feels more essential when applied to a greater amount of benefit. Brokamp advised retirees to consider delaying their Social Security claims if possible, noting, «Social Security, by the way, is partially tax-free. So the longer you delay it, the bigger benefit, the greater the amount of tax-free income you receive.” This strategy not only maximizes monthly benefits, but also increases the amount of tax-free income.
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