Social Security serves as a financial lifeline for millions of retired seniors. As a result, many seniors want to know what their cost of living adjustment (COLA) will be next year.
COLA was introduced to help seniors receiving Social Security maintain their purchasing power as the cost of living increases due to inflation. In 2023, due to rampant inflation, a Social Security recipient received a staggering 8.7% of her COLA. And the seniors are definitely looking forward to her amazing COLA in 2024.
There is currently less than a month left until the Social Security Administration (SSA) makes its official COLA announcement. However, it is important that Social Security recipients enter with reasonable expectations.
October 12th is an important day
The Social Security COLA is based on third-quarter data from the Consumer Price Index for Urban Wage and Office Workers (CPI-W), a subset of the broader Consumer Price Index (CPI). This is why COLA is announced in October. SSA must wait until all data is aggregated to calculate the annual COLA.
Meanwhile, the Bureau of Labor Statistics says the CPI for September will be released on October 12th. Therefore, that is when we can expect a formal ruling regarding her future COLA for Social Security recipients. Unfortunately, some seniors may be disappointed by the COLA in 2024, as it is likely to pale in comparison to the raise they received in 2023.
Inflation has slowed significantly this year. While this led to relief for gas stations and supermarkets, it also set the stage for a significant drop in COLA in 2024.
In fact, some recent estimates suggest that the COLA in 2024 will be around 3%. Depending on the inflation situation in September, this number could shift upward. But it’s highly unlikely we’ll see his COLA anywhere near last year’s 8.7%.
Medicare costs are also a factor.
In 2023, Medicare Part B costs will fall for the first time in years. This allows seniors on Social Security to get more out of their COLA.
For seniors who enroll in Medicare and Social Security at the same time, their Part B premiums are automatically deducted from their monthly benefits. Therefore, an increase in the cost of Part B could eat into your COLA. And that’s what he expects to happen in 2024.
It is better not to rely solely on social security.
Social Security COLAs are supposed to help seniors keep up with inflation, but they often fall short. And part of the reason has to do with Medicare increases eroding those raises.
This is just one reason why you shouldn’t retire based solely on Social Security. Obviously, today’s elderly people who are stuck in that ship cannot go back in time. But those who are still working can seize the opportunity to build savings during their careers, making them less reliant on Social Security overall in retirement. That way, you won’t have to spend your days worrying about her upcoming COLA. It’s something today’s retirees are definitely spending their mental energy on.