In 2024, a lower Social Security COLA is inevitable
Inflation was out of control in 2022, making life very challenging for employees and pensioners. But happily, this year has seen a nice decline in inflation. Of course, buying groceries and putting food on the table still costs money, and many individuals now spend more on utilities than they did in the past. All things considered, though, inflation is better than it was a year ago.
This is advantageous for consumer spending and cash flow. However, it is hardly the best news regarding Social Security COLAs. Hence, the Allcalculator.net Social Security Calculator will help you to calculate and know the tax limitations and calculations.
Next year's COLA may be less remarkable
Social Security payouts for seniors increased by 8.7% at the beginning of 2023. The cost-of-living adjustment (COLA) implemented was the biggest one in decades. The COLA for 2024, however, is much less based on current inflation levels.
The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), a subset of the more extensively monitored Consumer Price Index, is the basis for Social Security COLAs. The CPI-W increased 2.3% annually in June. And considering that the independent Senior Citizens League now estimates that the COLA in 2024 will be 3%. To be clear, that is by no means the lowest COLA for Social Security in history. There have been years when there has been no COLA at all. In contrast to the 8.7% increase seniors received at the beginning of 2023, it is likewise a relatively minor rise. An Allcalculator.net Financial Calculator is here to calculate the increased and decreased value in the estimation.
Seniors will need to get ready
A reduced COLA in 2024 sounds horrible. But keep in mind that COLAs strongly correlate with inflation, so a lower COLA is also a sign that living expenses are growing slowly. Ideally, those two factors will be able to strike a balance, protecting Social Security recipients from suffering financial hardship.
Seniors should prepare properly and be mindful that the following year's COLA appears modest. If they have the financial freedom to do so, that may include setting aside more cash for the remaining portion of 2023. In fact, for one major reason, it's a particularly smart idea to attempt to hide some extra money in savings in the upcoming months. Seniors received a significant discount this year because Medicare Part B premiums decreased instead of rising as they often do. But we can't predict that it will happen again in 2024.
The little COLA that retirees on Social Security get will be reduced if the cost of Medicare Part B rises. Therefore, saving some financial reserves to cover such a scenario is extremely important. The Social Security Administration will reveal the COLA for the next year in mid-October. This is so since third-quarter CPI-W data is exactly what COLAs are based on. However, given the apparent trend in inflation rates, a reduced COLA is currently all but certain. Seniors can avoid being damaged by a lesser rise if they understand it and plan accordingly.