The announcement of a 3.2% rise in Social Security benefits to combat inflation might not provide much relief for over 71 million Americans receiving these benefits monthly. This increase, which was declared on Wednesday for the year 2024, represents the third consecutive year of higher-than-average adjustments. Nevertheless, compared to the 8.7% increment in 2023, it seems minimal. It signifies roughly another $50 a month, pushing the average Social Security payout for all retirees to $1,907 in the following year.

Any effort to ease the relentless financial burden imposed by inflation is considered beneficial.

Mary Johnson, Social Security and Medicare analyst for the bipartisan Senior Citizens League, mentioned, For many people, Social Security is the only source of income they have, and cost-of-living adjustment serves as the only protection against inflation available. Even if the adjustment isn't as large as we'd hope, it’s still an adjustment. In comparison, other sources of retirement income such as 401(k)s or pensions don't usually factor in inflation.

According to a survey of 2,258 members by the Senior Citizens League in September, 68% reported that their household expenses stayed at least 10% higher than the previous year, even with the slowing inflation rate.

The yearly adjustment echoes the fluctuations in the Consumer Price Index for Wage Earners and Clerical Workers (CPI-W), which is decided based on the variation in average inflation figures for Q3 2023, in contrast to the same period a year earlier.

How beneficial the inflation adjustment proves will be heavily reliant on the rise in Medicare Part B premiums. These premiums are typically subtracted from Social Security benefit checks, and in certain years, increased Medicare premiums have offset any advantages from the inflation adjustment.

A Medicare Trustees report in March projected the standard Medicare B premium in 2024 would rise to $174.80, up from $164.90 in the previous year. However, this estimate was prior to the new Alzheimer’s treatment, Leqembi, being covered under Medicare. The Senior Citizens League predicts this might increase costs by $5 a month.

Nonetheless, a mediocre cost-of-living adjustment isn’t the most significant challenge faced by Social Security-dependent retirees. Projections indicate that by 2033, the program will experience a revenue deficit of about 23%. By that time, it’s predicted that system reserves will be exhausted and incoming payroll tax revenue won't suffice to meet current benefits levels. Since the Social Security system can’t borrow to meet deficits, adjustments will be required, or retirees could suffer severe cuts.

Johnson observed that many individuals worry about maintaining sufficient retirement income, but fears of potential Social Security cuts are starting to top these concerns. This intensifies the necessity of planning when to start receiving Social Security benefits. For instance, claiming benefits at the earliest age of 62 means forgoing 30% of the total benefits attainable at full retirement age, which for many is 67.

According to a study by Northwestern Mutual, 42% of Americans anticipate a future devoid of a program like Social Security. Their survey of 2,740 Americans showed baby boomers expecting Social Security to constitute 38% of retirement funding. Meanwhile, Gen Z, Millennials, and Gen X foresee it accounting for 15%, 19%, and 27% of retirement finances, respectively.