As retirees look towards 2024 with anticipation for the Social Security Cost-of-Living Adjustment (COLA), the expected increase may not be the financial panacea many are hoping for. With the COLA set at 3.2%, this translates to an average of just over $50 extra per month for the more than 66 million beneficiaries. While this adjustment is designed to help Americans maintain their standard of living in the face of inflation, the reality is that it may need to stretch further, especially when it comes to healthcare costs.
Understanding the 2024 Social Security COLA
The COLA is a safeguard against inflation, but for many seniors, the increase is insufficient to cover the rising costs of essential expenses. For instance, a retired couple may see a monthly COLA increase of approximately $135. However, when you subtract the increases in Medicare Part B, drug plans, and Medicare supplements, they might only retain around $53.60. With the deductible on their drug plan also rising, the net benefit can quickly evaporate.
The Healthcare Cost Conundrum
Healthcare remains the most significant expense for older adults, consistently outpacing the COLA. The math is simple yet disheartening: the COLA increase is often entirely consumed by healthcare costs, leaving retirees to face the rest of inflation’s challenges with depleted resources. This situation is exacerbated by the fact that poverty among Americans older than 65 has been on the rise, reaching 14.1% in 2022.
Stretching Healthcare Dollars
To cope with excessive drug costs, some seniors are turning to Canadian pharmacies, where prices can be significantly lower. For example, a medication that costs $550 for a 30-day supply in the U.S. might be obtained for as little as $49 per month from a Canadian source. While this approach can offer relief, it’s a symptom of a more significant issue with the state of healthcare for seniors in the U.S.
Planning for the Future
Financial experts emphasize the importance of early financial planning. It’s recommended to allocate a third of your income for medical expenses in retirement. For those already in retirement, resources such as BenefitsCheckUp.org and State Health Insurance Assistance Programs can assist with expenses ranging from food and medicine to utilities.
The upcoming COLA increase is a step in the right direction. Still, it’s clear that for many retirees, more is needed to keep up with the rising living costs, particularly in healthcare. Seniors must explore all available resources and plan strategically to ensure their financial stability in the face of these challenges.
While the COLA provides some relief, it’s evident that a comprehensive approach, including personal financial planning and utilization of available assistance programs, is essential for retirees to navigate the economic landscape of 2024 and beyond.