Social Security checks will go up next year, but for Lou Scrivani, 76, a retired recruitment firm executive, the increase won’t even be enough to cover the increases in his healthcare costs, let alone the price inflation of everything else over the past year.
Starting in January, more than 66 million program beneficiaries will receive a 3.2% cost-of-living adjustment, or COLA, which averages out to more than $50 more per month.
The COLA is designed to help Americans keep pace with inflation, so they can maintain their standard of living year after year. But the increases are smaller than expected, according to many seniors. According to the Senior Citizens League, a nonprofit organization that advocates on behalf of seniors, the cost of items on which seniors spend the most money consistently exceeds the COLA. Health care is the biggest expense.
Even with indexing, “we won’t be able to pay enough to keep up with current inflation,” said Scrivani, who lives in Delaware.
Show me the math
Here’s how Mr. Scrivani does the math for him and his wife:
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Total monthly COLA increase for both: about $135.
- Monthly Medicare Part B increase: approximately $10 x 2 = $20.
- Increase in prescription drug coverage: $25.70 x 2 = $51.40.
Increase in supplemental insurance: $10 total.
This means that of the $135 monthly COLA increase, the Scrivanis keep about $53.60. However, their drug plan deductible has increased by $60.
“So it’s a $53 increase,” Scrivani explains. “With current inflation rates, we find ourselves in negative territory.
And this example only takes into account the increase in healthcare costs. Add in the rising prices of housing, food, gas and utilities, and the hemorrhaging gets worse, and seniors have to hope their savings will cover the difference, say experts and seniors alike.
But that’s not always the case.
Poverty has increased among Americans aged 65 and over for three consecutive years, rising from 10.7% in 2021 to 14.1% in 2022, according to the latest Census Bureau data.
“We have a problem and a lot of people are feeling it,” said Kris Whipple, partner and financial advisor at Kristopher Curtis Financial in Nashville, Tennessee. “So I’m wondering what can be done. What can I do? Plan accordingly.
Do Americans have enough savings to cover extra costs every year?
According to the Senior Citizens League, more than a quarter of 1,055 adults surveyed in the first three months of the year said they had depleted a retirement account in the past 12 months. This figure is up from 20% in the second half of last year.
According to the League, a record 45% of those surveyed said they had been in credit card debt for more than 90 days, despite rising interest rates.
“The fear that retirement income won’t be enough to cover essential expenses in the months ahead is a major concern,” said Mary Johnson, Social Security and Medicare policy analyst at the Senior Citizens League, in a statement last month.
Will health care costs get cheaper?
Many of the cost-saving measures in the Inflation Reduction Act won’t be implemented any time soon.
Only the $35/month limit on insulin and the free vaccines recommended for adults under the Medicare Part D program went into effect this year.
Negotiations with pharmaceutical companies on prices for 10 drugs began this year, but “most of the savings, if any, won’t be seen by anyone, for any drug, until about 2026,” Scrivani said.
Starting January 1, out-of-pocket expenses of $8,000 (including certain payments made by other people or entities on your behalf) will automatically qualify you for “catastrophic coverage,” meaning you won’t have to pay co-pays or co-insurance for drugs covered under Part D for the rest of the calendar year.
The $2,000 cap on annual direct cost sharing for prescription drugs is not expected to occur until 2025.
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What do seniors do to stretch their health care dollars?
Drug costs are so high that many seniors order from Canadian pharmacies to pay only a fraction of U.S. prices.
Scrivani takes Xarelto to prevent strokes. With his insurance and co-payment, it costs him $550 for a 30-day supply. Using GoodRx, a free online platform for comparing prescription drug prices, he would pay between $528 and $567, depending on the pharmacy, or nearly $7,000 out of pocket each year.
These prices prompted him to do extensive research to find cheaper drugs. The Canadian government and the U.S. Food and Drug Administration offer advice on finding pharmacies online or abroad, and some people consult People’s Pharmacy for information on consumer drugs or check the list of pharmacies approved by the International Pharmacy Association of Canada.
Mr. Scrivani says he has cut costs considerably by using a Canadian pharmacy. His medication is shipped from Turkey, and this year he will receive a three-month supply for $119, or $49 a month, compared with $550 a month from the U.S. pharmaceutical company authorized to sell the drug.
“This is the state of healthcare for the elderly in this country,” he said.
In extreme cases, Whipple said some people even move to Texas, California or Arizona so they can easily cross the border into Mexico to buy medicine. While he understands why people do this, he and other financial experts say the best course of action is to develop a financial plan earlier in life.
Morgan D. Hill, managing director of wealth management firm Hill & Hill Financial, said, “You have to plan a third of your life. “You have to plan for a third of your income for medical expenses.
What resources can seniors tap now to help them, overall?
If you’re already in the throes of old age, here are a few ways to find help:
- Use BenefitsCheckUp.org to find local assistance programs for everything from food and medicine to utilities, or call the toll-free hotline 1-800-794-6559, Monday through Friday, 8 a.m. to 7 p.m. ET.
- For help from Medicare and Medicaid, see state health insurance assistance programs or call 1-877-839-2675.
- Visit or call your local social services office if you don’t have a computer or internet access. A few months ago, this approach helped 69-year-old Bick Adams of Saltville, Virginia, find $23 a month through the Supplemental Nutrition Assistance Programme (SNAP). “That’s enough to buy milk, bread and maybe a dozen eggs,” he said.
Adams, whose wife Cheryl, 64, has cancer, also found out they qualify for Limited Medicaid, which he hopes will help pay some of this month’s bills.
Applying by phone is time-consuming, but “we’re lucky. Sure, I can’t go to a ball game and I need a hearing aid, but we have heat and food, and we’re grateful for that. We’re just old people looking out for each other.”
Medora Lee is USA TODAY’s money, markets and personal finance reporter. You can contact her at [email protected] and subscribe to our free Daily Money newsletter for personal finance tips and business news Monday through Friday.