Seniors receiving Social Security had a huge change to celebrate at the beginning of 2023: the biggest cost-of-living adjustment (COLA) to occur in decades.
After a year of battling inflation, the 8.7% increase in benefits to begin 2023 has unquestionably helped many seniors gain much-needed purchasing power. In contrast, it is anticipated that the Social Security cost-of-living adjustment (COLA) for 2024 will be significantly lower than in 2023. Seniors must prepare accordingly.
How Social Security COLA Is Calculated In Texas
Social Security COLA is based on CPI-W data for wage earners and clerical workers from the third quarter (CPI-W). In March, the CPI-W annual increase was only 5%.
Recent inflation data indicate that the COLA for 2024 will likely be less than 3%, as reported by the nonpartisan Senior Citizens League. Depending on the course of inflation over the remainder of the year, it could fall below 2%.
On the one hand, a reduction in the COLA may not be such a bad thing, as it would indicate a moderation in inflation. This alone could provide enormous financial relief for senior citizens and working Americans alike.
Senior Citizens’ Response To A Lower COLA In Texas
After receiving an 8.7% raise in 2023, however, senior citizens are unlikely to respond positively to a 2% or 3% COLA. And it is crucial that recipients of Social Security understand that their benefits will increase less next year.
Even with substantial COLAs, many seniors who receive the majority of their retirement income from Social Security struggle to make ends meet. However, if you are able to do so, it would be prudent to set aside additional funds in the event that your 2024 COLA is significantly lower than anticipated.
If you are unable to save more money in 2023, you can still assess your financial situation and make changes to prepare for a more modest increase in 2024.
Even if you are unable to increase your savings in 2023, you can evaluate your budget and make adjustments to account for a smaller Social Security increase in 2024.
This year’s cost-of-living adjustment (COLA) of 8.7% was truly exceptional, so next year’s was never likely to match it. The sooner Social Security recipients learn what to expect, the better they will be able to plan.
Notably, Medicare Part B premiums decreased in 2023, making it possible for seniors to receive a larger Social Security cost-of-living adjustment. It is unknown what Medicare costs will look like in 2024, but if they increase in tandem with a smaller cost-of-living adjustment (COLA), a large number of seniors could suffer financial harm.
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