Retirees Are Returning to Work After the Latest Social Security Cost-of-Living Adjustment (COLA)

It's hardly a secret that retiring on Social Security is not an ideal situation. Those benefits will only replace about 40% of pre-retirement wages for average earners. And that doesn't account for potential benefit cuts, which may be on the table in about a decade's time as Social Security's trust funds run dry.

But it's not just that Social Security benefits only provide a limited amount of replacement income. It's also that the program's cost-of-living adjustments, or COLAs, do not do a very good job of helping beneficiaries maintain their buying power as inflation drives living costs upward.

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In a recent Motley Fool survey , 62% of respondents said they felt Social Security's most recent 3.2% COLA (which kicked in this past January) was insufficient. And now, 44% of respondents say they're considering a return to work because Social Security isn't providing them with enough income to keep up with their living expenses.

Of course, working in retirement has its benefits. But it's one thing to return to a job because you want to. It's another thing to land in that boat because money is tight and you have no choice. And unfortunately, a good number of Social Security recipients today are clearly in the latter category.

Should you go back to work if your Social Security benefits aren't keeping up?

If you don't have much savings and therefore get most of your income from Social Security , then a return to a job may be necessary if you're currently not making ends meet. Of course, another option is to try cutting back on expenses and seeing if that helps. But there may only be so many bills you can trim. That's why getting a job may be your best bet.

Now the good thing about working in retirement is that it gives you a good way to stay busy. And you may find that work serves as a social outlet for you as well. That's important, because retirees commonly grapple with feelings of loneliness and isolation.

But going back to work isn't a great thing if it's something you don't want to do. Before you resign yourself to a boring, lousy job, though, consider looking to the gig economy first. You may find that you're able to turn a hobby you enjoy into a source of income.

For example, if you're someone who played piano your entire life, you may be able to give lessons as a means of generating income. And you may find that work more fulfilling than standing at a cash register or working some other relatively dull administrative job in an office.

Changes to Social Security COLA calculations are needed

A big reason so many retirees feel that their COLAs aren't keeping up with inflation is that those raises are calculated based on changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). But the CPI-W does not necessarily reflect the costs seniors specifically face, which is why a better solution may be to calculate COLAs based on the CPI-E, or Consumer Price Index for the Elderly.

Of course, even if changes happen to the way Social Security COLAs are determined, that still doesn't address the issue that retiring mostly or solely on those benefits isn't a great idea. So if you're still working, make every effort to boost your savings so you don't have to go back to a job in retirement due to a lack of income. Whether you decide to work for the purpose of keeping busy or feeling more fulfilled is a different story.

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