Social Security benefits, a vital source of income for retired workers, experienced a tumultuous journey in recent years.
Following a year of inadequate cost-of-living adjustments (COLAs) in 2022, Social Security recipients received a historic raise in 2023, providing relief from the rising costs of living.
Social Security Benefits’ Roller Coaster Journey
However, as the roller coaster ride continues, experts predict a much smaller raise for retired workers in 2024.
Despite this news, the positive aspect lies in the regained buying power and the potential for continued growth in the latter half of 2023.
In 2022, the United States faced the fiercest inflation in four decades, wreaking havoc on the economy.
Rising gas prices, grocery costs, and monthly utility bills placed Americans in a precarious financial situation.
Unfortunately, retired workers relying on Social Security benefits were hit particularly hard, as the 5.9% COLA failed to counteract inflation.
Consequently, their buying power eroded, creating financial strain.
To rectify the situation, the Social Security system is designed to correct itself periodically.
In 2023, retired workers witnessed a historic 8.7% COLA, the most substantial increase in over four decades.
This additional income acted as a lifeline, potentially restoring lost buying power.
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Preserving Purchasing Power: The Impact of Social Security’s Annual COLAs
However, this positive development is accompanied by a dose of less favorable news.
The annual COLAs for Social Security benefits aim to preserve the purchasing power of retirees by adjusting payouts in line with inflation.
The adjustments are determined based on changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) during the third quarter (July through September).
While data for the 2024 COLA is not yet available, experts have already begun providing estimates.
Inflation has considerably slowed in the past year, with the CPI-W rising only 2.3% in June 2023, compared to 9.8% in June 2022. This suggests a much smaller COLA for 2024, with The Senior Citizens League estimating a 3% raise for Social Security recipients.
The Social Security program disburses benefits to millions of retired workers, spouses, survivors, and disabled workers each month.
Based on the estimated 3% COLA, the table below illustrates the expected average increase in benefits for different groups in 2024:
- Average retired worker: $55.12 per month
- Spouses: $26.79 per month
- Survivors: $43.56 per month
- Disabled workers: $44.59 per month
The possibility of a lower COLA in 2024 may frustrate Social Security users, but there is a bright side to the scenario.
Over the past year, inflation has fallen off quickly, giving Social Security benefits a sizable boost in purchasing power.
Benefits are really on schedule to make up for the lost purchasing power in 2022.
The table below presents the inflation rates for the first half of 2022 and 2023, as measured by the CPI-W.
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