The most recent cost-of-living adjustment (COLA) for Social Security was 8.7%. This was the most significant increase in decades.
Inflation soared in 2022, driving up the cost of living for all retirees and causing many to struggle financially. This year, however, seniors may fare somewhat better.
Social Security Recipients Get Huge Raise
Social Security recipients received a massive raise at the start of 2023, and it appears to be holding up well so far.
Obviously, it was justified. The Social Security COLA is based on changes in inflation. In spite of the fact that senior citizens had a difficult time keeping up with rising living expenses in 2022, there was a silver lining: the state’s high rate of inflation ensured a substantial COLA in 2023.
Since the beginning of 2023, the annual rate of inflation has been reducing. Consequently, the current Social Security COLA may finally be assisting seniors in gaining purchasing power relative to the previous year.
However, the Social Security cost-of-living adjustment (COLA) for next year may differ significantly from the increase implemented in early 2023. And this is something seniors should prepare for.
Will your 2024 Social Security COLA reduce?
The third-quarter Consumer Price Index for Urban Wage Earners and Clerical Workers is used to calculate Social Security COLAs (CPI-W). Inflation increased last year by a sufficient amount for Social Security benefits to increase by 8.7 percent this year.
However, annual growth in the CPI-W was only 4.5% in March. This year’s much lower inflation readings from the index raise concerns that the upcoming increase in Social Security payments to retirees will fall short of expectations.
Obviously, there would also be relief from rampant inflation. And that is an essential point. However, many senior citizens continue to rely on Social Security as their primary source of income. Following an 8.7% COLA with a much, much smaller one could be perceived as a setback.
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Make the most of your higher paycheck
The Social Security COLA for 2024 will not be known until the third quarter CPI-W data becomes available, so seniors will have to wait until October for this information.
But for the time being, Social Security recipients who do not require all of their benefits to cover essential living expenses should attempt to save a portion of their benefits.
So, if the 2024 Social Security increase is excessively meager, they will have cash reserves to fall back on.
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