In 2023, Social Security beneficiaries saw a historic cost-of-living adjustment (COLA) with an 8.7% increase, the largest in over four decades. The Social Security Administration announced the 2024 COLA adjustment, which is not as large as the 2023 increase. That said, the 3.2% increase is nothing to sneeze at, as it is still 23% more than the average increase for the last two decades. From the past five years, the annual percentage increases to Social Security benefits were:
- 2018: 2.8%
- 2019: 1.6%
- 2020: 1.3%
- 2021: 5.9%
- 2022: 8.7%
With this increase, the average beneficiary will see an additional $59 per month or more than $700 for the year, according to AARP CEO Jo Ann Jenkins. The average monthly retiree benefit is about $1,790 in 2023. Those receiving the benefits will see this increase beginning in January.
Is it enough?
This adjustment will be welcomed by retired senior citizens and disabled workers but might not be the increase they were hoping for, especially after last year’s increases. Americans across the board have seen higher prices throughout the year with the continued rise in interest for most common goods and basic essentials. The rise in cost has had a significant impact on the more than 70 million Americans receiving Social Security. The good news, however, is the reasoning for the smaller increase, is because inflation is not rising at nearly the rate it was last year. The adjustment is calculated based off the average Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) across the 3rd quarter of the calendar year. The CPI-W places more emphasis on transportation, food, and apparel while placing less emphasis on medical care, housing, and recreation when compared to other CPI metrics. Government data, released Thursday, showed a 3.7% rise in the CPI-W metric when compared to last year in September. Even with interest rates rise at a slower rate than last year, more than two-thirds of Senior Citizens report their household expenses are at least 10% greater than a previous year, according to a survey conducted by The Senior Citizens League. With the dramatic increase in costs fewer retirees feel their financially stable and will continue to be throughout their retirement years. This is especially true for those who do not have additional courses of income from pensions, 401(K)s, other retirement accounts, or other investments.
Bottom Line
If you or a loved one receive social security benefits, here is what you should take away. There will be some more money in the monthly paycheck, but this is not a bonus. This additional money is meant to keep up with the additional cost of living. For beneficiaries who are concerned their nest-egg is not enough, there are many options to help grow retirement income, emergency funds, and savings. Look for High Yield Savings Accounts (HYSAs), Certificate of Deposits (CDs), or various other forms of fixed income. A financial advisor should be able to help allocate retirement accounts appropriately.
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