Seniors who rely primarily or exclusively on COLA Social Security frequently experience financial hardship.
This is due to the fact that, on average, those benefits will only replace around 40% of the average senior’s pre-retirement income.
Decreased Inflation Benefits For COLA Social Security
Many senior citizens find that they need between 70% and 80% of their prior income to live comfortably.
However, a bone was offered to Social Security claimants this year in the form of an 8.7% cost-of-living adjustment (COLA).
That rise was the largest Social Security increase to occur in decades, and it undoubtedly gave many retirees some purchasing power back.
The fact that the cost of Medicare Part B didn’t increase at the same time as the Social Security COLA in 2023 made it even more beneficial.
Increases in Part B premiums reduce benefits like pay raises. However, as seniors were exempt from that in 2023, many of them undoubtedly made the most of their 8.7% COLA.
While the Social Security increase in 2023 was undoubtedly one for the history books, the COLAs in 2024 appears to be much less. And beneficiaries ought to be ready for that.
Inflation serves as the basis for Social Security COLAs. And happily, since peaking in mid-2022, inflation has significantly decreased. On the one hand, that’s fantastic news for all consumers, not just pensioners.
Lower Inflation Means Smaller Benefit Increase
However, declining inflation also means that seniors won’t receive the same increase in Social Security benefits in 2019 as they did in 2018 or the year prior.
The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), a subset of the larger Consumer Price Index, is used exclusively to compute Social Security COLAs based on data from the third quarter.
It’s too early to predict the exact structure of next year’s COLA because the third quarter of the year has not yet arrived.
Read more: Social Security COLA: Potential Decrease To 3% Or Less In Benefits