July 12, 2024

Projected Social Security COLA Increase for 2024: Seniors Likely to Face Disappointingly Minimal Raise Compared to 2023

The projected cost-of-living adjustment (COLA) rise for Social Security beneficiaries in 2024 is anticipated to be notably smaller than the increase in 2023. This news might be a letdown for numerous seniors, as highlighted by a nonpartisan organization dedicated to seniors’ concerns.  Their research indicates that a significant majority, approximately 80% of retirees, express ongoing financial strain due to the persistently high inflation rates.

The Senior Citizens League (SCL) has proposed a new estimate for the upcoming COLA, suggesting a potential increase of about 3 percent. This translates to approximately $54 to the current average monthly benefit payment of $1,789.

It’s important to note that this estimation remains subject to alteration. The SCL has indicated that its ultimate projection for the 2024 COLA will be disclosed on September 13th.

The Social Security Administration (SSA) is expected to announce the actual COLA for 2024 sometime in mid-October.

In its official computation, the SSA uses the average of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the third quarter of 2023, encompassing the months of July, August, and September. This figure is then compared to the corresponding data from the previous year.

Mary Johnson, Social Security and Medicare policy analyst at SCL, said, “The COLA announcement is expected to be October 12, 2023, barring any unforeseen delays from a government shutdown.”

In 2013, a partial government shutdown led to delays in the official COLA announcement.

The most recent COLA estimation, approximately 3 percent, aligns somewhat with the SCL’s prior forecast. However, it stands significantly below the previous year’s increase of 8.7 percent, a surge attributed to the occurrence of inflation reaching its highest point in decades.

In July, the annual inflation rate, a crucial factor in determining COLA adjustments, experienced a slight increase to 3.2 percent from June’s 3 percent. Although this surpasses the Federal Reserve’s targeted rate of approximately 2 percent, it’s important to note that the current inflation figure is significantly lower than the peak observed 40 years ago in June 2022, which stood at a high of 9.1 percent.

The SCL stated, “In 2023, Social Security recipients received the highest COLA in more than 40 years, but 79 percent of retirees report that lingering high prices continue to impact household budgets significantly. High costs have significantly impacted older Americans’ ability to access healthcare.”

In a survey conducted by SCL in mid-July involving 1,759 retirees, nearly 80 percent of respondents indicated that necessities such as housing, food, and prescription drugs carry higher costs than the previous year.

Roughly 66% of the surveyed retirees revealed that elevated costs had led them to delay dental care, encompassing significant procedures such as dentures, bridges, and implants.

Furthermore, nearly 30% of the retirees shared that they had deferred actions like filling prescriptions or seeking medical attention.

Mary Johnson told Yahoo Finance, “ Older consumers, especially those with lower retirement incomes, remain vulnerable to some of the higher prices that haven’t gone down.”

The most recent inflation data reveals a 7.7 percent increase in housing expenses over the past year and an 8 percent rise in rent. In contrast, the projected 3 percent COLA adjustment appears significantly distant from these statistics.

Richard Priedits, residing in Grand Rapids, Michigan, shared with The Associated Press that he has observed escalated housing costs during his yearly vacation. “We are using credit cards a lot more. The hotel was probably about $100 more … We filled up the tank this morning. It was like $90. It’s expensive everywhere.”

Certain analysts anticipate a substantial deceleration in the rate of housing inflation in the upcoming period, as rental costs are anticipated to exhibit a delay in being accurately portrayed within the government’s inflation data.

Lydia Boussour, the senior economist at EY-Parthenon in New York, told Reuters, “Housing disinflation will pick up momentum in the coming months.” 

In spite of the deceleration in the growth of inflation, which peaked at 9.1 percent in June 2022, the impacts of rising prices continue to resonate with consumers.

Based on a Bankrate survey conducted in July, 72 percent of Americans express a lack of financial security. Within this group, an even more noteworthy 63 percent highlight the challenge of achieving financial comfort due to the significant inflationary pressures.

An additional Bankrate survey conducted in June revealed that 68 percent of respondents are reducing their savings for unforeseen circumstances due to the effects of inflation.

Social Security will have problems in the future because of different things like prices going up, how the economy is doing, and not getting as much money from taxes as predicted.

A group called the Committee for a Responsible Federal Budget (CRFB) recently guessed that by 2033, the Social Security fund for retirement might not have enough money, which could lead to a 23 percent reduction in benefits. This would mean that in 2033, a couple who just retired and used to earn money from two sources might get $17,400 less every year.

​​People are discussing what will happen to Social Security in the future, especially because the 2024 presidential campaign is starting.

Former President, Donald Trump, has told his fellow Republicans not to reduce the money people get from Social Security. At the same time, President Joe Biden has promised to stand up against any plans by the Republican party to lower the amount of money paid through Social Security.

CRFB says that any 2024 presidential candidate who “pledges not to touch Social Security is implicitly endorsing a 23 percent across-the-board benefit cut for the 70 million retirees” when the fund runs out of money within ten years.

Because of this, both political sides are saying it’s important to find a solution together.

On July 12, Senator Chuck Grassley from Iowa spoke in a meeting of the Senate Budget Committee. He said we should ensure Social Security stays good for the people who will come after us.

Senator Grassley asked the members of Congress to do what President Ronald Reagan and House Speaker Tip O’Neill from Massachusetts did in the 1980s.

Grassley asked, “When you have candidates for president on the Republican side, and you have a Democratic president in office today who say, ‘We’re not going to touch Social Security,’ how are you going to get things done?”

The only way to reach a deal on Social Security is to follow the Reagan–O’Neill model. That means Congress and the president are working bipartisan and keeping a chain, a range of options on the table,” Mr. Grassley said, referring to the 1983 agreement that stabilized Social Security for decades.

The Reagan-O’Neill plan mostly involved making payroll taxes higher and raising the retirement age.

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