The forecast for next year’s Social Security increase has increased slightly, from 3% to 3.2%, due to August inflation figures reported by the government.
As inflation continues to be a concern for many, it is possible that this adjustment needs to adequately address the challenges Social Security recipients confront.
2024 Social Security COLA Impact Amid Inflation
In August, annual inflation increased to 3.7%, surpassing July’s rate of 3.2%.
This increase, however, pales in comparison to the 40-year maximum of 9.1% in June 2022.
Excluding the volatile food and energy sectors, the ‘core’ inflation rate stood at 4.3%, slightly lower than the 4.7% reported in July.
Despite these fluctuations, inflation continues to outpace the Federal Reserve’s 2% target.
In 2024, the non-profit Senior Citizens League projects a 3.2% COLA increase for Social Security recipients.
Even though this is less than the 8.7% COLA experienced in 2023, it is greater than the 2.6% average observed over the past two decades.
Mary Johnson, a Social Security and Medicare policy analyst at The Senior Citizens League, emphasizes that cost-of-living adjustments (COLAs) frequently result in only modest increases in benefits. COLAs are intended to protect the purchasing power of Social Security recipients from inflation, but they have struggled to keep up.
According to the Census Bureau, seniors were the only category to experience an increase in poverty between 2020 and 2021.
Considering various factors, such as government benefits, taxes, and essential expenses, the poverty rate for senior adults rose to 14.1% in 2022 from 9.5% in 2020.
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Seniors’ Challenges: Social Security, Inflation, and Finances
Social Security replaces only about one-third of the average earnings of middle-income earners. In addition, a substantial proportion of senior individuals begin receiving reduced benefits before reaching complete retirement age.
In 2021 and 2022, high inflation rates had an enduring effect, with the average Social Security benefit decreasing by $1,054.
As their household costs have outpaced the dollar amount of their COLAs, many retirees doubt their ability to recover.
Medicare Part B premiums, deducted monthly from Social Security payments, impose additional financial burdens on older people.
The Medicare Trustees anticipate an increase in premiums to $174.80 in 2024, up from $164.90 in 2023.
As COLAs rise, the taxation of Social Security benefits has also become a concern, as more retirees pay taxes on a portion of their benefits.
The rising cost of living has caused many seniors to delay necessary medical care.
According to surveys, dental care, eye examinations, and medical treatments have been delayed because of deductibles, out-of-pocket expenses, and unanticipated bills.
The Social Security Administration determines the cost-of-living adjustment (COLA) based on the consumer price index for urban wage earners and clerical workers (CPI-W) from July through September.
In the most recent data, the CPI climbed by 3.7%, while the CPI-W rose by 3.4%. Future COLA projections are influenced by the most recent inflation data, with July and August playing a significant role in the calculation.
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