The next Social Security COLA increase won't be enough to solve this crisis.

By Jessica Hall

Millions of older adults already can't afford housing, food or healthcare.

The expected Social Security cost-of-living adjustment, or COLA, won't go far enough for retirees who are already stretched thin by consumer prices that remain stubbornly high.

The COLA announcement is slated for Oct. 10 and analysts expect a slim 2.5% increase amid cooling inflation, according to independent Social Security and Medicare analyst Mary Johnson. That's down from this year's 3.2% increase and the 8.7% jump in 2023. The average COLA increase over the past 20 years has been about 2.6%, according to the nonpartisan Senior Citizens League.

The COLA gain is expected to be the lowest since 2021. It would add about $48 a month to the average Social Security check in 2025. That's based on the current average Social Security check for retirees of about $1,907, according to the Social Security Administration.

Some of the COLA will be eroded by an increase in the Medicare Part B premium, which is expected to rise to $185 per month, up $10.30 from the current $174.70 a month. Medicare Part B is directly deducted from Social Security checks, so any Medicare increase will offset some of the COLA gain.

"This won't help us at all. It's $48 a month. That will fill my car up once in a month. That's two bags of feed for our chickens. It's nothing," said Susan, a 71-year-old woman in central Virginia who said she relies heavily on Social Security for the bulk of her monthly budget. (She declined to provide her last name.) "We spend $300 a week at the [grocery] store. We supplement that with venison - my husband hunts. We're country people. But $48 doesn't add much no matter who you are."

Susan said that although the price of gasoline has gone down, her electric bill has gone up and vet bills for her two dogs have risen dramatically. Putting a new roof on her house and replacing the HVAC system and appliances have been financial shocks that an increase in COLA can't touch.

"I'll take the extra money. I'm grateful. But it's not enough. It's a drop in the ocean," Susan said. "Life is hard. It could be worse, but it's hard already."

The expected COLA increase comes as about half of adults ages 60 and older can't cover their basic needs of housing, food, transportation and healthcare, according to an updated analysis by the National Council on Aging and LeadingAge LTSS Center at UMass Boston.

The research found that 49.6% of older adults, or more than 27 million households, can't cover their basic needs as calculated by the Elder Index. The data from 2020, which was the most recently available, showed a nearly 5% increase in households from just two years earlier and had yet to show the full effects of the pandemic.

"This is where people were before the economic downturn for the country," said Jane Tavares, co-author of the report and instructor at UMass Boston's department of gerontology. "People went into the downturn with not great circumstances. In these numbers, we haven't seen the full impact of the pandemic. We're expecting an even bleaker picture when that data becomes available."

The Elder Index shows how much money older adults in different areas need to meet their basic needs and age in place, or live independently in their home as they age. It focuses on the bare-bones needs of housing, transportation, Medicare payments and food - such as the lowest-cost food plan that meets the USDA requirements for nutrition. It does not allow for recreation, entertainment or eating meals outside the home.

For example, a single, older adult in good health who rents their home would need $2,059 a month to live in West Virginia, below the national average, but $3,000 a month to live in California, which is above the national average. That same retiree in Florida would need $2,408 a month to cover their basic needs. The national average is $2,479 a month, or $29,748 a year, according to the Elder Index.

Even a slight boost from COLA won't make much of a difference to those living in such tight financial circumstances.

"There's nothing in the economy that would lead us to believe there would be a dramatic shift for the better for older adults," said Jessica Johnston, senior director for the National Council on Aging's Center for Economic Well-Being. "It's going to become a bigger and bigger problem as more of the population ages and turns 65 this year. Unless we have major policy initiatives, we're leaving older adults behind."

The study found that while older adults' income increased modestly from 2018 to 2020, 60% experienced a decrease in overall assets. In fact, the bottom 20% of Americans ages 60 and older (15 million households) had no assets, and some were in debt. This group had a median income of $18,000 in 2020. Almost 90% of this segment had household incomes below the Elder Index level.

"These findings certainly show that despite gains in income, many millions of older adults continue to live on the edge," said Marc Cohen, co-author of the report and co-director of the LeadingAge LTSS Center at UMass Boston.

Tavares said the situation is unsustainable.

"It gets worse and worse. It's a crisis. We can't sustain it," Tavares said. "We're a country of firefighters - we don't do something until we're in the worst part of a crisis. But we're there now."

-Jessica Hall

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

10-07-24 1152ET

Copyright (c) 2024 Dow Jones & Company, Inc.