At the beginning of 2023, monthly benefits for seniors enrolled in Social Security increased by 8.7%. This was the largest cost of living adjustment (COLA) in decades.
However, the scale of COLA in 2024 is becoming considerably smaller. And based on recent inflation data, the bipartisan Alliance on Seniors projects next year’s COLA will be 3.2%. An increase of this size would raise benefits by $57, which averages $1,790 per month.
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Obviously, this is very different from 8.7%. And many seniors may not be satisfied with this number. But while a 3.2% COLA may seem like a bad thing, it actually isn’t.
Why a smaller cola isn’t so bad
Many Social Security recipients rely heavily on COLAs to make a living. Therefore, a smaller increase may seem like a blow, especially after the hefty 8.7% increase in 2023.
However, one thing to keep in mind if you’re disappointed in recent COLA projections for 2024 is that these increases are directly related to inflation. So a smaller COLA simply means that inflation is calmer, while a larger COLA means that inflation is more prevalent and destructive.
In other words, seniors are actually in a break-even situation. If you’re upset about getting a smaller raise in 2024, the alternative is the possibility that you won’t have to pay to buy groceries, put gas in your car, or cover your utility bills. Please remember that there is. So it’s not a total loss.
It’s also worth noting that while the 3.2% COLA clearly doesn’t compare to the 8.7% increase, it’s still higher than the average COLA for Social Security over the past 20 years. Over the past 20 years, seniors have received an average 2.6% raise from Social Security. And there were years when seniors didn’t get any COLA at all. In that sense, 3.2% doesn’t seem that bad.
Learn more in October
The Social Security Administration cannot officially announce the 2024 COLA until October. COLA is based on third-quarter inflation data, so you’ll have to wait until September’s Consumer Price Index is released to get the final numbers.
Depending on the situation in September, the COLA in 2024 could be slightly higher or lower than 3.2%. But for now, it’s fair to use that number as an estimate.
If you’re worried that a COLA in the 3.2% range won’t help your household much, think about other ways to improve your situation. That might mean finding ways to cut expenses, like joining the gig economy, downsizing from her two cars to his, or downsizing their home.
The purpose of the COLA is to help Social Security recipients maintain purchasing power during periods of inflation. It doesn’t necessarily help them move forward. So while his COLA of 3.2% may seem disappointing at first, when you look at the data, an increase of this size is actually quite fair and makes a lot of sense.