What to Expect from Social Security Increase 2024
Social Social Security Benefits Cola 2024
Social Security is a vital aspect of many Americans’ retirement. It ensures that those who have worked hard their whole lives are financially secure in their golden years. One major component of Social Security is the Cost of Living Adjustment, or COLA. This annual adjustment helps to enhance the purchasing power of benefits and ensure that retirees can keep up with inflation. However, a recent projection suggests that the COLA could be just 3% in 2024, which could have a significant impact on those who rely on Social Security the most. In this blog post, we’ll explore what could cause this decrease and how it might affect older Americans.
How COLA is Calculated
Firstly, it’s essential to understand what the COLA is and how it’s calculated. Every year, the Social Security Administration looks at the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to determine if there has been a rise in the price of consumer goods and services. If there has been, the COLA will be adjusted accordingly. The CPI-W is made up of items such as food, housing, transportation, and medical care, all of which are vital to older Americans’ well-being. However, CPI-W saw an overall decrease in 2020 due to the pandemic’s economic shutdowns. This decrease resulted in the 2021 COLA being just 1.3%, one of the lowest increases in recent years.
Social Security Trustees’ Financial Projections
Secondly, while the overall CPI-W decrease caused by the pandemic is one factor in the projected 2024 decrease, there are other reasons as well. One of the most significant causes is the Social Security Trustees’ financial projections. According to these projections, the Social Security Trust Fund is expected to run dry in 2034. This means that if there is no legislative action, the program will only be able to pay out around 75% of scheduled benefits. As a result, the Social Security Administration must be careful about how they increase the COLA. The lower the COLA, the more money will remain in the Trust Fund to help sustain the program for future generations.
Potential Economic Growth Rates
Thirdly, the 3% projected COLA for 2024 is the result of a calculation based on potential economic growth rates. If the economy grows rapidly, then the COLA could be higher than 3%, but if it doesn’t, there could be no COLA at all. Given the uncertainty in the economy, predicting future COLAs with any accuracy is challenging. This uncertainty and the ongoing discussion of how best to preserve Social Security mean that older Americans may need to consider alternative sources of income in their retirement portfolios.
What can you do to prepare for a low COLA in 2024?
In terms of how this might affect middle-class and poor class Americans, the 2024 COLA decrease could be challenging for those who rely mainly on Social Security. If the decrease causes their benefits to fall behind the rate of inflation, they may need to consider cutting back on necessary expenses, such as food and medicine. Make a budget and stick to it. Other options available to them include seeking help from family members, finding part-time work, and applying for government assistance programs like SNAP.
Without the annual COLA adjustment, Social Security benefits may not keep pace with the rising cost of living, making it difficult for older Americans to maintain their standard of living. Unfortunately, projections suggest that the COLA could be just 3% in 2024 due to various economic and legislative factors. While this decrease may not have a substantial impact on some retirees, those who rely heavily on Social Security may see their quality of life decrease. It’s essential that middle-class and poor class Americans examine their retirement portfolios and plan carefully for the future, given the uncertainty of the Social Security program.