In this article we look at the forthcoming adjustments to Social Security benefits for the upcoming year. We include the factors influencing these changes and their potential impact on our financial well-being. How will the Social Security COLA for 2024 affect you?
Recent findings from The Senior Citizens League (TSCL) suggest that the Cost of Living Adjustment (COLA) for the year 2024 is likely to approximate 3%. This projection is based on an intricate analysis of consumer price data, which has revealed a consistent trend towards this particular percentage increase.
Method for Determining the COLA
The method by which the COLA is determined is of paramount importance. The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) serves as the metric for evaluating inflation and, consequently, shaping the COLA. Notably, while the CPI-W has shown a year-over-year increase of 2.6%, the average monthly inflation rate has experienced a gradual upswing, particularly since the beginning of this year. These nuances in inflation dynamics have contributed to the substantiated estimation of a 3% COLA, grounded in data from the month of July.
Understanding the significance of the July Consumer Price Index (CPI) data becomes paramount when grasping the COLA mechanism. This data informs the calculation of inflation during the third quarter—comprising July, August, and September. By comparing this current period’s average to that of the previous year, the percentage variance is identified as the amount of the forthcoming COLA. This increment will be applicable to the Social Security disbursement received in January 2024. Comprehensive details regarding the COLA computation for 2023 can be accessed on the Social Security website.
What Does This Mean for You?
Should the projected 3% COLA materialize, the average monthly benefit of $1,789 would be augmented by approximately $53.70. While this may appear modest in isolation, its cumulative effect can be impactful, contributing to the preservation of our financial stability.
However, it is essential to acknowledge that despite a seemingly lower overall inflation rate compared to a year ago, a considerable number of senior citizens continue to grapple with the repercussions of persistently elevated prices. A recent survey conducted by TSCL underscores this reality. The findings indicate that a significant proportion of elderly Americans contend with ongoing financial constraints due to high living costs.
In the year 2023, retirees received the most substantial COLA increase in over four decades. Nonetheless, a staggering 79% of retirees acknowledge that the enduring influence of elevated prices continues to impede their financial equilibrium. The results of The Senior Citizens League’s Retirement Survey, conducted in mid-July 2023, offer revealing insights:
79% of respondents experienced an escalation in their monthly essential expenditures (housing, food, and prescription drugs) in the preceding year.
A substantial 66% deferred dental care due to financial considerations.
Approximately 43% postponed obtaining optical examinations and prescription eyeglasses.
Close to a third of survey participants delayed essential medical care and prescription filling, attributing their decisions to high deductibles, out-of-pocket expenses, and unexpected bills.
Beyond the challenge of persistent inflation, further revelations emerge from the survey. A notable observation is that 23% of Social Security beneficiaries now find themselves liable to pay taxes on a portion of their benefits—a novel experience for them. This new reality is attributed to the amplified COLA increments witnessed recently. With an 8.7% COLA increase in 2023, it is projected that this proportion will further increase during next year’s tax season.
In conclusion, the intricacies surrounding the 2024 Social Security COLA adjustments are of profound importance to us as seniors. The delicate interplay between inflation trends, COLA computations, and the practical implications for our financial stability underscores the necessity for informed awareness. As we await the finalization of these adjustments, it is prudent for us to engage in proactive financial planning, mutual support, and information sharing, as we collectively navigate the evolving financial landscape.