What Will Happen In Year 2024

October 15, 2023 Kristal

What Will the Social Security COLA Raise Be for 2024?

The Social Security Administration announced that beneficiaries will receive a 3.2% raise starting in January 2024. This means larger checks to the more than 66 million retirees who receive Social Security benefits. The Social Security Administration indicates that, on average, beneficiaries will see an increase of more than $50 per month starting in January. For those on a fixed income, the increase could be a welcome boost, though it is a smaller adjustment than last year’s raise of 8.7%.

The announcement regarding the change to benefits occurs annually. Every October, the Social Security Administration determines the cost-of-living adjustment, or COLA, for the following year. This rate is applied to the checks that will be distributed to beneficiaries every month. The COLA is set after a review of inflation data, and the rate accounts for current and upcoming trends.

As Americans look ahead, it can be helpful to know:

— The reasons behind the Social Security COLA for 2024.

— How the Social Security COLA changes.

— Ways for Social Security beneficiaries to earn more.

— How to prepare financially for 2024.

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The Reasons Behind the Social Security COLA for 2024

There is a method that is used to establish the COLA every year. The Social Security Administration reviews the percentage changes of the consumer price index during the third quarter from one year to the next. This information is applied to the calculations for the upcoming COLA.

The consumer price index for September 2023 came in at 0.4%, according to the U.S. Bureau of Labor Statistics. The rate indicates that prices went up by 0.4% from July 2023 to August 2023. Items increased by an average of 3.7% during the previous 12 months. Overall inflation in 2023 has been lower than in 2022, which saw 40-year highs such as 9.1% in June of that year.

Furthermore, the consumer price index for August 2023 was 0.6%, meaning prices rose by 0.6% from June 2023 to July 2023. Overall the cost of goods rose by 3.7% during the previous 12 months. In July 2023, the consumer price index was just 0.2%, indicating a 0.2% increase from May 2023 to June 2023. The overall prices went up by 3.2% during the prior 12 months.

The low rates are indicators that living expenses for Americans, on average, have not climbed steeply during the last months. “Ultimately, the Social Security Administration determines its cost-of-living adjustment based on its expectations for the rate of inflation in the next year,” says Krieg Tidemann, assistant professor of economics at Niagara University. The announcement of 3.2% coincides closely with what some experts predicted. The Senior Citizens League, for instance, had estimated the COLA could be 3% for 2024.

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How the Social Security COLA Changes

In 2023, the COLA was 8.7%, which was the largest increase since 1981. This came following a 5.9% increase, which was the highest in four decades at the time it was issued. A paycheck of $1,000 in 2021 would have increased by $59 in 2022 to $1,059. Following the COLA of 2023, the amount would have gone up by an estimated $92 to be $1,151. An additional 3.2% bump will lead to an increase of $37 on the 2023 payout, making a benefit amount of $1,188 in 2024.

Given this, some may view the lower rate of 3.2% as less of an increase. “Remember that COLA is directly tied to inflation,” says Jeremy Keil, financial advisor at Keil Financial Partners in New Berlin, Wisconsin. “The only reason COLA was so high in 2022 and 2023 is because inflation was so high in 2021 and 2022.”

This could be a sign of continued cooling inflation, and rates that might coincide with historic averages during the previous decades. “Prior to 2022, the 30-year COLA average was 2.4%, so hopefully this is a sign that inflation is returning to ‘normal,’” Keil says.

Ways for Social Security Beneficiaries to Earn More

The COLA increases in recent years may be helping retirees cope with current costs, and in some cases, to have more discretionary income than in the past.

“Given that seniors may be temporarily benefiting from the current 2023 COLA being well above the current rate of inflation, those with the means to increase savings over the remainder of 2023 can stand to benefit,” Tidemann says. “In particular, given 15-year highs in interest rates on short-term (certificates of deposit) or money market savings accounts, seniors may wish to transfer available assets to these safe and relatively liquid saving instruments that offer a better rate of return than traditional savings and checking accounts.”

In addition, retirees could search for temporary or seasonal jobs to help boost income. If you are over your full retirement age, there won’t be limitations on what you can earn before benefits are reduced. Additional supplemental income could come from retirement accounts such as a 401(k), IRA, or pension.

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How to Prepare Financially for 2024

As retirees think about the upcoming months, it may be wise to review current living costs.

“Look for ways to save on groceries, monthly bills and anything else you can think of,” says David Bakke, financial expert at Dollar Sanity based in Norcross, Georgia.

Many places offer discounts for seniors, so check what’s available and be ready to show identification to qualify.

Another way to prepare includes mapping out plans and then allocating funds to make them happen. If you want to start a new hobby or travel more in the coming year, you’ll want to see what’s possible and within your budget. While the COLA might bring in extra cash, you might want to set aside some additional funds for certain activities.