Social Security Is Giving Retirees a Raise in 2024. It Won't Be Enough.

The 3.2% raise coming to Social Security recipients in January will fall considerably short of the higher prices older adults are paying for auto insurance, rent, and other essentials.

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Even as investors have cheered cooling inflation, prices remain elevated on a host of goods and services. The consumer price index gained 3.1% in November from the same time last year, down from 3.2% in October.

On the surface, that would seem to be good news for retirees who will receive 3.2% in next year's cost-of-living adjustment to their Social Security benefits. That is an additional $57 a month on an average retirement benefit of $1,790.

And yet, slowing price growth still means paying more for many necessities. In just a couple examples, rent is up 7% year over year and auto insurance is up 19%, according to an analysis by The Senior Citizens League of Bureau of Labor Statistics data. Rising new and used car prices are one of several factors pushing up auto insurance costs for all ages.

Separately, premiums tend to increase for drivers starting around age 70 to 75, says Breanne Armstrong, director of insurance intelligence at J.D. Power, who noted that usage-based insurance was one option for lowering costs, especially for those who drive less in retirement.

Some of the spending categories with the biggest price jumps are those that older adults tend to consume in greater quantities, such as medical care. Outpatient hospital services are up 7% year over year.

In addition, standard Medicare Part B premiums are rising by nearly $10 a month in 2024, to $174.70 monthly. These premiums eat directly into the COLA, since they are deducted from most beneficiaries' Social Security checks.

Retirees are often surprised by how much they spend on medical costs, says Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League and author of the report. Not only is Medicare coverage not free, but the program also doesn't pay for certain big-ticket services, including most dental care and long-term care.

Just over a third of respondents to a Senior Citizens League survey this summer reported spending between 16% and 29% of their household income on medical costs, including Medicare premiums and out-of-pocket costs.

Inflation is one factor keeping older adults in the workforce. Nearly one in five Americans age 65 and over were working in 2023, according to a recent report by the Pew Research Center.