In a sweeping change that has left over 100,000 individuals without Supplemental Security Income (SSI) benefits, the Social Security Administration (SSA) has seen a significant drop in the number of claimants. Between May 2023 and May 2024, SSI benefits recipients decreased from 7,380,737 to 7,261,342, a reduction of 119,395, according to recent SSA data.
The bulk of the reduction comes from adults and children with disabilities or who are blind, a category that saw a drop of 140,034 recipients. The number of SSI recipients in the 65 and older category, however, experienced a slight increase, rising from 1,099,669 to 1,120,308.
California, the state with the highest number of SSI recipients, saw a significant decrease of 16,573 claimants, primarily among those who are blind or disabled. Similarly, Texas and New York reported drops of 14,587 and 9,555 claimants, respectively. In contrast, states like North Dakota and Rhode Island saw minimal changes, with North Dakota's SSI population decreasing by just 17 people.
The reasons behind this decline remain unclear, and the SSA has yet to provide an explanation. Some speculate that the decrease could be related to administrative changes or policy adjustments aimed at tightening eligibility criteria.
Concurrently, the SSA has announced a significant shift in how it evaluates claims for SSI and Social Security Disability Insurance (SSDI) benefits. As of June 22, 2024, the agency has removed several obsolete job listings, such as reptile farmer and railroad telegrapher, from the criteria used to determine whether an applicant can perform specific jobs based on their abilities.
This reduction in SSI benefits comes amid broader financial challenges for many retirees. Inflation has moderated over the past year, but the rising cost of living continues to outpace the annual cost-of-living adjustments (COLAs) provided by Social Security. In 2024, retirees received a 3.2% COLA, but many have reported that their expenses increased by more than that percentage, leading to a decrease in the buying power of their benefits.
"Whether it's a trip to the gas station, grocery store, or pharmacy, prices in the U.S. have increased noticeably in recent years, and that is particularly challenging for retirees living on fixed income sources," said Deb Boyden, Head of U.S. Defined Contribution at Schroders.
The Senior Citizens League has highlighted that Social Security benefits have historically struggled to keep up with inflation, and the trend appears set to continue. The nonprofit advocacy group predicts that the COLA for 2025 will be around 2.6%, a significant decrease from the previous year's adjustment and the lowest in four years. This forecast is based on current economic data and could be revised downward if inflation continues to cool.
Social Security COLAs are calculated based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the third quarter of the year. The percentage increase from the previous year's third quarter determines the COLA for the following year. With the final data for September to be released on October 10, the SSA will announce the official COLA for 2025.
The potential 2.6% increase in Social Security benefits would provide only a modest bump for retirees already struggling with rising living costs. This situation underscores the need for retirees to consider additional financial strategies. For instance, separating necessary and discretionary expenses and trimming where possible can help. Additionally, taking advantage of high-yield savings accounts can provide better returns on savings.
Working with a financial advisor is another recommended strategy. According to Schroders, retirees with a formal financial plan report nearly twice as much income as those without one. Moreover, understanding and leveraging little-known Social Security benefits can also significantly boost retirement income. For example, specific strategies could help retirees gain as much as $22,924 more annually.
As retirees navigate these financial challenges, it remains crucial to stay informed about changes in Social Security policies and benefits. While the SSA's recent adjustments and the anticipated lower COLA for 2025 present hurdles, proactive financial planning can help mitigate some of these impacts and ensure a more secure retirement.
