Social Security checks COLA or the Cost of Living Adjustment in order to help consumer maintain their purchasing power. In fact, there are millions of Americans that rely on befits and take advantage of this increase in their checks. Otherwise, they will start to face a severe loss in the value of their incomes.
According to CBS news, the Seniors Citizens League has reported an estimate of below 3% in the next year’s COLA. Actually, it could be even lower than that. In order to carry out this report, they have used the recent trends of inflation. By having a look at the average Consumer Price Index in the last 12 months, they can do so.
The Social Security analyst from the Senior Citizens League, Mary Johnson, reported to CBS news they use a basket of services and goods workers often buy. Bear in mind the Federal Reserve usually has a target of annual inflation as high as 2%. Inflation trends are unpredictable though, and prices could soar again.
What effect can COLA cause on Social Security retirement beneficiaries?
According to Social Security, the COLA effect brought an 8.7% increase at the end of December 2022. For example, for retired workers who collected $1,680, it meant a $147 increase. Therefore, Social Security beneficiaries got a check worth $1,827. Despite the high increase, some might claim it was not enough.
Nevertheless, even if it is not enough it will certainly be useful. Not only have retirees received this extra money, but it was also for spouses of retired workers, widows or widowers, and people with a disability. Some experts believe very low inflation could not be beneficial for Social Security retirement beneficiaries.
How does SSA decide not to have COLA?
Social Security uses the figures regarding the percentage increase in the Consumer Price Index but from the third quarter. Then, they compare it with the percentage from the previous year. Thus, there is no COLA when there is no increase once compared both figures. To have COLA in 2024, this has to happen.
As inflation and Social Security increase has been the highest in four decades, the inflation figures will have to go over that percentage. Hopefully, the financial situation gets better and prices start to decrease by the end of 2023. Soaring prices and high mortgage rates have decreased consumers purchasing power. There are other predictions.
Some economists believe 2023 inflation will be about 4% according to FactSet. Whatever the new COLA is and how high or low inflation is, it is advisable to plan your budget. Having an emergency fund will certainly come in handy to tackle unexpected expenses. Do as much as you can to have a stable financial situation and make the most of your Social Security retirement benefits.