Retirees Are Struggling as Social Security Benefits Shrink

2024-06-22

Retirees have been significant contributors to consumer spending in 2023, buoyed by a substantial increase in Social Security. However, this trend might see a slowdown as the cost of living adjustment (COLA) decreases this year. 

Record Hike in COLA

Image Credit: Shutterstock / Rosie Apples

In 2023, Social Security beneficiaries saw an 8.7% increase in COLA, the highest in four decades. This adjustment significantly boosted spending among older adults.

A Diminishing Impact

Image Credit: Shutterstock / Goksi

Despite this increase, the COLA for 2024 is projected to be just 3.2%. Experts anticipate that the impact on retirees’ spending power will lessen as a result.

Comparison With Inflation

Image Credit: Shutterstock / Deemerwha studio

The 2023 COLA surpassed the inflation rate, providing retirees with extra spending power. However, the 2024 adjustment aligns closely with expected inflation rates.

Diverse Income Sources

Image Credit: Shutterstock / Dmytro Zinkevych

Retirees often have multiple sources of income, including pensions, allowing their spending to remain relatively strong despite COLA reductions.

Generational Spending Patterns

Image Credit: Shutterstock / fizkes

Data indicates that older generations significantly outspent their younger counterparts in 2023, with baby boomers and the silent generation leading in credit- and debit-card spending.

Asset Distribution

Image Credit: Shutterstock / one photo

Baby boomers held around $80 trillion in assets in the second quarter of 2023, far surpassing the $14 trillion held by millennials.

Drawing Down Savings

Image Credit: Shutterstock / metodej

Baby boomers have been withdrawing from their savings and checking accounts more slowly than younger generations, potentially indicating more available funds for future spending.

Spending Out of Necessity

Image Credit: Shutterstock / Butsaya

Despite increased spending, analysts suggest that older adults may be spending more out of necessity due to rising prices rather than discretionary spending.

Healthcare and Home Repairs

Image Credit: Shutterstock / Ground Picture

Some spending may be attributed to delayed medical treatments and home repairs that were postponed during staffing shortages in previous years.

Impact of COLA on Beneficiaries

Image Credit: Shutterstock / Jack_the_sparow

The 8.7% COLA resulted in an average increase of $146 per month for beneficiaries, while the 2024 adjustment is estimated to be around $50 a month.

Survey on Spending Habits

Image Credit: Shutterstock / Andrey_Popov

A survey by the Senior Citizens League found that 45% of older respondents spent less than $2,000 a month, 37% spent between $2,000 and $3,999, and 15% reported spending $4,000 or more.

Reliance on Social Security

Image Credit: Shutterstock / Rix Pix Photography

Approximately 40% to 44% of seniors depend entirely on Social Security for their income, primarily spending on essentials such as housing, healthcare, and groceries.

Sustainability Concerns

Image Credit: Shutterstock / Julia Zavalishina

Analysts are concerned about how long retirees can maintain this level of spending without depleting their savings.

Future Financial Health

Image Credit: Shutterstock / Jonathan Weiss

Bank of America predicts a decline in older generations’ assessment of their financial health in six months, while younger generations have more positive expectations.

Spending to Narrow

Image Credit: Shutterstock / Standret Natalia

Despite the anticipated decrease in COLA, Bank of America suggests that retirees will continue to outperform other age groups in spending, albeit by a narrower margin.

The Road Ahead

Image Credit: Shutterstock / FOTOGRIN

The decrease in COLA may lead to a reduction in retirees’ spending growth. The continued observation of these trends will be crucial to understanding the broader economic impacts.

23 Steep Taxes Adding to California Residents’ Burden

Image Credit: Shutterstock / Alex Millauer

California: a place of sunshine, innovation, and, unfortunately, some of the nation’s highest taxes. From LA’s beaches to Silicon Valley’s tech hubs, residents grapple with a maze of state taxes. Here’s a glance at 23 taxes that might surprise both Californians and outsiders. 23 Steep Taxes Adding to California Residents’ Burden

Cash in on Nostalgia: 21 Toys Now Worth a Fortune

Image Credit: Shutterstock / Kostikova Natalia

Time to dust off the boxes and find that once-cherished toy from your childhood. For collectors and enthusiasts, they items have become valued objects and they can be worth big bucks – are there any of these in your attic? Cash in on Nostalgia: 21 Toys Now Worth a Fortune

Millennials Don’t Buy These 19 Products Anymore

Image Credit: Shutterstock / mariakray

Millennials are changing consumer habits, quietly replacing once-staple products and traditions. Often criticized for their disruptive preferences, this generation is reshaping the marketplace with digital expertise, ethical buying, and a taste for the unconventional. Millennials Don’t Buy These 19 Products Anymore

10 Reasons Firearms Are Essential to America’s Fabric

Image Credit: Shutterstock / rblfmr

Americans’ strong attachment to guns is influenced by constitutional rights, historical context, and cultural traditions. This article explores the cultural perspective driving their unwavering support for gun ownership, revealing the key factors shaping this enduring aspect of American life. 10 Reasons Firearms Are Essential to America’s Fabric

California’s 16 New Laws Raise Red Flags for Prospective Residents

Image Credit: Shutterstock / PeopleImages.com – Yuri A

California, celebrated for its beaches, tech prowess, and diversity, is now gaining attention for its recent legislation, prompting some residents to reconsider their residency. Explore the new laws of 2024 and the controversies and migration they’re stirring. California’s 16 New Laws Raise Red Flags for Prospective Residents

The post Retirees Are Struggling as Social Security Benefits Shrink first appeared on Thrift My Life.

Featured Image Credit: Shutterstock / Comeback Images.

The content of this article is for informational purposes only and does not constitute or replace professional financial advice.