The most tangible benefit is the additional income, with the average retired worker expected to receive an extra $59 per month in the coming year.
The Social Security COLA for 2024 has been confirmed at 3.2%, bringing both positive and negative implications for beneficiaries
This increase pales in comparison to the more substantial pay bump of $146 per month witnessed in 2023. One key aspect to consider is the impact on potential Social Security benefit cuts. While the colossal 8.7% Social Security COLA in 2023 resulted in the largest pay raise since 1982, it also accelerated the timeline for potential benefit reductions. The 2024 Social Security COLA, although slightly lower than initially estimated, will not expedite these cuts, providing a decade for Congress to address Social Security’s financial challenges.
The Social Security COLA serves as a reimbursement mechanism to compensate for lost buying power due to inflation
Despite the 3.2% increase in 2024 theoretically covering 2023’s inflation, recent data reveals a concerning trend. Inflation, measured by the CPI-W, rose from 2.3% in June to 3.6% in September, a total increase of 4.1% in the first nine months of 2023.
The potential downside lies in the risk that the 3.2% Social Security COLA may underestimate the impact of rising prices if inflation continues to accelerate. As the year-end approaches, prudent financial planning may be essential to mitigate potential challenges arising from the evolving economic landscape.