Social Security isn’t likely intentionally misleading us but they are leaving out some details that every person contemplating retirement needs to know. Social Security announced the cost of living adjustment for 2024: 3.2%. This will go into effect 1/1/2024. However, your benefit won’t likely go up the full 3.2%. Why? I’ll share the answer in this episode of Retirement Made Easy.
You will want to hear this episode if you are interested in…
- [1:48] Check out RetirementMadeEasyPodcast.com!
- [2:47] The cost of living adjustment and Medicare Part B
- [10:03] Social Security benefits will be cut
- [15:04] Social Security benefits won’t likely cover monthly expenses
The cost of living adjustment (COLA) and Medicare Part B
Medicare announced that the COLA for 2024 would be 3.2%. But your Medicare Part B premium comes out of your social security benefit, so you may not get the full 3.2% raise. In 2009, 2010, and 2015 there wasn’t a COLA but Medicare Part B premium costs increased. So social security checks were actually reduced during those years.
If you’re on Medicare, your Medicare Part B premium will come out of your social security check, starting at $165 and increasing based on your income. So if your check was $2,000 a month, it would be reduced to $1,835. Higher-income earners may be paying far more, further reducing your check. Social security statements should be modified so you know that this is happening.
Secondly, let’s say you’re 60 today and looking at what you’ll get if you claim your benefit at 70. The estimate they provide doesn’t tell you that they’re assuming you’ll still be working full-time at your same capacity for the additional years. That’s why the benefit appears far higher. But Social Security and Medicare won’t spell it out for you.
Social Security benefits will be cut
In the article, “Social Security’s COLA for 2024 is 3.2%, vs. 2023’s historic 8.7% inflation-fueled adjustment,” it says:
“The COLA announcement comes as Social Security is facing a funding shortage. If no action is taken, the trust fund that supports Social Security will be able to pay full benefits only until 2033, at which point the fund’s reserves will become depleted and only able to pay 77% of scheduled benefits.”
2033 sounds like a long way away—but it’s only 10 years. Numerous proposals are being made in Congress to modify Social Security to ensure its longevity but we aren’t sure what will happen.
The article goes on to say that half of Seniors rely on their social security benefits and ¼ of them rely on it for at least 90% of their income. Social Security and Congress know that hundreds of thousands of retirees depend on this income. If their check is cut by 23%, it will be devastating.
Social Security benefits won’t likely cover your monthly expenses
According to AARP, the average Social Security benefit is $1,789 monthly. A 3.2% raise will be approximately $59 a month. It’s not a huge jump.
Social Security statements clearly say: “Social Security benefits are not intended to be your only income source when you retire. On average, Social Security will replace 40% of your annual pre-retirement earnings. You will need other savings, investments, pensions, or retirement accounts to live comfortably. Use this statement as a tool for planning your financial future.”
So $1,789 minus $165 for Medicare Part B leaves us with $1,624. If $1,624 replaces 40% of your pre-retirement income, that means the average person will still have to come up with $2,436 to cover their monthly expenses.