Understanding Social Security’s Cost-of-Living Adjustment (COLA) for 2024

The Senior Citizens League (TSCL) recently issued a warning, saying that seniors may be in for a surprise next year when their Social Security benefits could increase by the lowest amount in four years.

Social Security payment amounts are adjusted annually according to the cost of living adjustment (COLA), which provides seniors with a new monthly check based on the rate of inflation. Inflation has caused Social Security benefits to soar over the last few years. While 2024 saw a COLA of 3. Seniors experienced Social Security increases of up to 8%. 7 percent in 2023.

However, seniors shouldnt expect a similar uptick in 2025. As an alternative, TSCL stated that they can expect a COLA as low as 1. 4 percent, the lowest level since 2021, when it was 1 3 percent.

In December, inflation stood at 3. 4 percent. If things keep getting better, seniors who have to pay more than average for housing and medical care may find the lower increase concerning.

“A slowing increase in inflation will hurt the Social Security COLA, which will definitely impact retirees receiving Social Security,” said Kevin Thompson, a certified financial planner and the CEO of 9i Capital Group, in an interview with Newsweek on Friday. Seniors will suffer from this because food costs are currently high and are not going down. “.

Before the Social Security Administration (SSA) formally announces the adjustment in October, the estimate for the 2025 COLA could change, but seniors are still worried about how this could impact their quality of life.

The COLA average over the previous 20 years has been 2. 6 percent, meaning that the anticipated growth in 2025 would be more than 1 percent less than what seniors are typically accustomed to.

About 25% of seniors must rely on Social Security benefits for 90% of their income, while the majority of seniors receive at least 50% of their income from these sources. The ability of people who depend on Social Security to pay for health care may be one of their largest obstacles because those costs are still significantly higher than a 1 4 percent COLA would indicate, Thompson said.

“One of the biggest expenses for people receiving Social Security is health care, which continues to rise far faster than inflation,” he continued. “Although the COLA increase will only provide a slight benefit and have little to no effect on the rising costs of food and healthcare, seniors will still have to rely on it.” “.

Future seniors are already concerned about Social Security’s future because, in the event that reform is not implemented, the program will see a 23% reduction in benefits in 2033.

Even with this years 3. 2 percent COLA on Social Security benefits, leaving many elderly people unhappy and putting them in difficult financial situations Read more.

According to research conducted in November by the legal assistance platform Atticus, 40% of seniors are thinking about going back into the workforce due to the high rate of inflation and 70% of single seniors are having financial difficulties.

“About that 3. “Although a 2 percent COLA increase for 2024 sounds good on paper, it’s not quite enough for seniors,” financial adviser and Houston First Financial Group president Christopher Hensley previously told Newsweek.

The consumer price index, on which the COLA is based, does not appropriately account for changes in health care costs, so it is unlikely that the rising costs seniors are actually facing will be reflected in your Social Security check.

Hensley remarked, “Although any increase in Social Security is generally good news, it’s almost like taking one step forward and another back when its this small and Medicare premiums are climbing.”

Newsweek is dedicated to questioning received wisdom and making connections while looking for points of agreement.

Newsweek is dedicated to questioning received wisdom and making connections while looking for points of agreement.

Social Security payment amounts are adjusted annually according to the cost of living adjustment (COLA), which provides seniors with a new monthly check based on the rate of inflation. Inflation has caused Social Security benefits to soar over the last few years. While 2024 saw a COLA of 3. Seniors experienced Social Security increases of up to 8%. 7 percent in 2023.

However, seniors shouldnt expect a similar uptick in 2025. As an alternative, TSCL stated that they can expect a COLA as low as 1. 4 percent, the lowest level since 2021, when it was 1 3 percent.

The COLA average over the previous 20 years has been 2. 6 percent, meaning that the anticipated growth in 2025 would be more than 1 percent less than what seniors are typically accustomed to.

Even with this years 3. 2 percent COLA on Social Security benefits, leaving many elderly people unhappy and putting them in difficult financial situations Read more.

In December, inflation stood at 3. 4 percent. If things keep getting better, seniors who have to pay more than average for housing and medical care may find the lower increase concerning.

Millions of Social Security beneficiaries will receive a 3- 2% percent more in benefits in 2020–24, much less than this year E2%80%99s historical boost and reflecting moderating consumer prices

Thursday’s announcement follows this year’s 8. Benefits increased by 7% as a result of record-breaking, multi-year inflation that drove up consumer goods prices. With inflation easing, the next annual increase is markedly smaller. MORE INFLATION COVERAGE.

People like Alfred Mason, an 83-year-old resident of Louisiana, will be significantly impacted by the cost of living adjustments. Mason stated, “Any increase is appreciated because it helps us get through what we’re going through.” ”.

Approximately 71 million people receive Social Security benefits, including children, disabled individuals, and retirees.

According to the annual Social Security and Medicare trustees report, which was made public in March, the program’s trust fund will run out of money in 2033 and won’t be able to pay full benefits. According to the report, the government will only be able to pay for 2777% of the scheduled benefits if the trust fund is exhausted.

2024’s Social Security increase might be getting bigger

FAQ

What is the $16728 Social Security bonus?

What is the estimated Social Security increase for 2025?

What is the 2024 COLA for federal retirees?

What is the maximum Social Security benefit in 2024?

Will Social Security benefits increase in 2021?

Approximately 70 million Americans will see a 1.3 percent increase in their Social Security benefits and Supplemental Security Income (SSI) payments in 2021. Federal benefit rates increase when the cost-of-living rises, as measured by the Department of Labor’s Consumer Price Index (CPI-W).

When will Social Security benefits increase?

The Social Security Administration announced Wednesday that its beneficiaries will see a 5.9 percent increase in their benefit checks starting next year — the largest boost to benefits in close to four decades. The adjustment will be made for 64 million Social Security beneficiaries as well as 8 million Supplemental Security Income recipients.

Will Social Security benefits increase in 2022?

Millions of retirees on Social Security will get a 5.9% boost in benefits for 2022. The biggest cost-of-living adjustment in 39 years follows a burst in inflation as the economy struggles to shake off the drag of the coronavirus pandemic. WASHINGTON — Millions of retirees on Social Security will get a 5.9% boost in benefits for 2022.

Will social security increase in 2023?

For the 70 million Americans who receive Social Security, experts say the significant increase in benefits slated for 2023 is much-anticipated and much-welcomed. Social Security recipients, most of whom are over age 65, have seen their payments increase almost every year for more than four decades to keep up with the cost of inflation.