In 2023, all retirees in the United States, including Social Security recipients, are grappling with the reality of inflation. Every American, retired or not, can observe that prices are generally climbing annually, even though the surge has been somewhat milder in recent months.
While everyone is impacted by the general hike in prices, non-retired Americans have a potential buffer: they might receive a wage increase. Unfortunately, retirees lack this option, and that’s precisely where the Cost of Living Adjustment (COLA) steps in. COLA provides Social Security beneficiaries a monthly financial lift to help them navigate through these economic shifts.
Peering into 2024, we’re presented with a COLA, a customary occurrence, but it isn’t as robust as we had hoped. Hence, the discussion about reductions in 2024 surfaces. It’s crucial to clarify that these aren’t outright cuts but rather a benefit increment that’s simply not ample enough for the current and impending inflationary landscape.
After the announcement of what the COLA will be for next year (3.2%), it seems to fall short. Even if we are receiving the maximum check of $4,555 in 2023, which is projected to increase to record levels next year, fighting inflation appears to be an uphill battle looming on the horizon.
HOW WILL A LOW COLA AFFECT SOCIAL SECURITY IN 2024?
The very low COLA we will see in 2024, especially when compared to the 2023 COLA, means that Social Security checks will not be enough to combat the overall price increase. So it will directly affect the lives of retirees.
In this regard we find that recipients of these benefits will have to look for an alternative source of income in some cases. Similarly, they could apply for Supplemental Security Income, but this benefit has specific mandatory requirements.
It is also a good idea not to spend too much money between now and 2024. It is true that we will have an increase, but the cuts with respect to the COLA are too large for Social Security retirees.
So what will happen is that retirees will lose a lot of purchasing power in the next year. This is very bad news for retirees who are waiting every year for the COLA to know if they can cope with so much general price increase.
Since there is no announcement of another increase other than the COLA, retirees will have to make their financial plans from what the Social Security Administration will add to current benefits. Remember, until the first of the 2024 payments we will not see this COLA.