Many retirees struggled financially in 2022 as inflation surged and the cost of living rose across the board. But this year, the seniors may be doing better. That’s because Social Security beneficiaries got a big raise in early 2023, and so far it seems to be holding up well.
Social Security’s latest cost of living adjustment (COLA) was 8.7%. This was actually the biggest pay raise in decades.
Of course it was justified. The Social Security COLA is calculated based on changes in inflation. So while the senior citizen has no doubt struggled to cope with rising costs of living in his 2022, the silver lining is that high levels of inflation will set his COLA state at scale in 2023. It was what I did.
Meanwhile, annual inflation has slowed since early 2023. This means that the current Social Security COLA for seniors may ultimately be helping to increase their purchasing power compared to previous years.
But next year’s Social Security COLA could look very different from the pay increases that were made in early 2023.
Will your Social Security COLA shrink in 2024?
The Social Security COLA is calculated based on third quarter data from the City Wage and Clerical Worker Consumer Price Index (CPI-W). Last year, the index recorded a sufficient rise in inflation that this year’s social security benefits he increased by 8.7%.
However, March’s CPI-W only rose 4.5% on an annualized basis. And if the index continues to record low levels of inflation for much of this year, Social Security seniors may be very disappointed with their upcoming pay increases.
Of course, you will be freed from rampant inflation on the contrary. And that’s the important thing. Still, many older people see Social Security as their main source of income. Following up her COLA of 8.7% with a much smaller COLA may seem like a blow.
make the most of a high salary
We won’t know what the 2024 Social Security COLA will look like until the third quarter CPI-W data is available, so seniors will have to wait until October for that information. But for now, Social Security beneficiaries who don’t need all the benefits to cover their living expenses should start to bank some of that money. There will be some cash reserves to fall back on, even if the raise in the US is overwhelmingly stingy.
On the other hand, workers with many years left in retirement will need to accumulate savings so that they do not rely on social security when their careers are over. I don’t know what the Social Security COLA will look like in the future.
In fact, it is quite possible that Social Security will have to cut benefits in just over a decade due to imminent funding shortfalls. So, regardless of what the future COLA looks like, increasing your savings and reducing your dependence on Social Security is a good thing.