A recent Motley Fool survey found that most retirees view this year’s cost-of-living adjustment (COLA) from the Social Security Administration as inadequate, with half considering reentering the workforce because “Social Security does not provide enough income to support their lifestyle. According to the survey, 36% of retirees found the adjustment “completely inadequate,” while 27% found it “somewhat inadequate. The COLA for 2024 was set at 3.2%, a significant decrease from the nearly 9% increase the previous year.
The survey included responses from 2,000 retired Americans who began receiving Social Security benefits in 2023 or later. With approximately 66 million Americans relying on Social Security for retirement income, there is growing concern about the sustainability of the 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, highlighted the discrepancy in how inflation is measured for retirees compared to the general population. “I think there is a problem with how we measure inflation for retirees versus inflation for the rest of America.”
He noted that while the COLA is based on a general basket of goods and services, it 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, the COLA was 3.2 percent [in 2024], but Medicare premiums went up almost 6 percent. So I think there is a problem with how we measure inflation for retirees versus inflation for the rest of America.”
The COLA mechanism, established in 1975, is designed to adjust Social Security benefits to counteract inflation. Adjustments are based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of the previous 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, “The COLA is set by law and is based on the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of the previous year in which a COLA was determined to the third quarter of the current year.
Tips to increase your COLA while receiving Social Security
Brokamp suggested that many retirees considering re-entering the workforce may indicate a reversal of the “Great Resignation” seen during the COVID-19 pandemic, when many people retired early. He referred to the current trend as the “Great Sabbatical,” noting, “Because a lot of these people are realizing that they retired too early. They had a nice break, but now they realize they need to go back to work.”
For some retirees, returning to work could also offer 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 both 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 it’s probably not 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 delaying Social Security claims. “The longer you wait, the bigger your benefit is up to age 70, because for every year you delay, your benefit gets bigger by about 8 percent. So if you delayed until age 70 and then got the COLA, you got that COLA on top of a larger amount. So that felt more adequate.”
Those who wait until 70 to claim benefits receive significantly higher payouts, about 8 percent more for each year they delay past full retirement age. He noted that retirees who expressed satisfaction with this year’s COLA were overwhelmingly those who had waited until 70 to claim their benefits. According to Brokamp, “The longer you wait, the bigger your benefit is at age 70; for every year you delay, your benefit gets bigger by about 8 percent. If you claim that early, you get the smallest benefit. So when you apply a COLA to that small benefit, it just doesn’t feel substantial.”
Consequently, the COLA increase feels more substantial when applied to a larger benefit amount. Brokamp advised retirees to consider delaying their Social Security claims if possible, noting, “By the way, Social Security, it’s partially tax-free. So the longer you can delay it, the larger the benefit, the larger the amount of tax-free income you get.” This strategy not only maximizes monthly benefits, but also increases the amount of tax-free income.
