It’s one you don’t want to miss.
Social Security serves as a financial lifeline for millions of retired seniors. As such, many seniors are eager to know what next year’s cost-of-living adjustment, or COLA, will look like.
COLAs were implemented to help ensure that seniors on Social Security can maintain their buying power as inflation drives the cost of living up. In 2023, Social Security recipients got an amazingly large 8.7% COLA on the heels of a stretch of rampant inflation. And seniors are no doubt hoping for an impressive COLA in 2024.
At this point, there’s less than one month to go until the Social Security Administration (SSA) makes its official COLA announcement. But it’s important for Social Security recipients to go in with reasonable expectations.
Oct. 12 is the big day
Social Security COLAs are based on third-quarter data from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), a subset of the more broad Consumer Price Index (CPI). It’s for this reason that COLAs are announced in October — the SSA needs to wait for all of that data to be aggregated to calculate yearly COLAs.
Meanwhile, this September’s CPI is set to be released on Oct. 12, says the Bureau of Labor Statistics. So that’s when we can expect an official ruling on an upcoming COLA for Social Security recipients. However, some seniors might unfortunately end up disappointed in their 2024 COLA, since it’s likely to pale in comparison to the raise seniors got in 2023.
Inflation has slowed down tremendously this year. And while that’s led to relief at places like the gas pump and supermarket, it also sets the stage for a substantially lower COLA in 2024.
Some recent estimates, in fact, have put 2024’s COLA around the 3% mark. That number could shift upward depending on what the month of September has in store for inflation. But there’s pretty much no way we’re going to see a COLA that’s anywhere close to last year’s 8.7%
Medicare costs will be a factor, too
In 2023, the cost of Medicare Part B went down for the first time in years. And that helped seniors on Social Security get even more out of their COLA.
Seniors who are enrolled in Medicare and Social Security at the same time have the cost of their Part B premiums deducted from their monthly benefits automatically. So when the cost of Part B rises, it can eat away at COLAs. And that’s what’s expected to happen in 2024.
It’s best not to rely on Social Security alone
Social Security COLAs are supposed to help seniors keep up with inflation, but they often fall short. And part of the reason for that has to do with Medicare hikes eroding those raises.
That’s just one reason why it’s best not to retire on Social Security alone. Clearly, today’s seniors who are stuck in that boat can’t go back in time. But those who are still working can seize the opportunity to build savings during their careers so they’re less reliant on Social Security as a whole in retirement. That way, they won’t have to spend their days worrying about upcoming COLAs — something retirees today are no doubt expending mental energy on.
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