The Social Security Administration announced on Thursday that Social Security benefits will grow by 3.2% in 2024, a significant decrease from the gains pensioners got over the previous two years as inflation continues to reduce.
According to the administration, over 66 million Americans who are collecting Social Security will be receiving larger payments starting in January, according to Fox Business.
Social Security's Annual COLA Boost Provides Relief
The Social Security Administration has revealed that the annual cost-of-living adjustment (COLA) for Social Security benefits will bring some relief to millions of recipients. Starting in January, the average beneficiary will receive over $50 extra monthly.
The AARP estimated This COLA increase at $59 per month, making it a significant boost for retirees, disabled individuals, and other Social Security recipients. The importance of this adjustment is not lost on Kilolo Kijakazi, the acting commissioner of Social Security, who stated, "This will help millions of people keep up with expenses."
With approximately 71 million beneficiaries relying on Social Security for their financial well-being, this increase is a welcome change. However, it's important to note that this year's COLA increase is significantly smaller than the previous year's substantial 8.7% bump.
The 8.7% increase was driven by a 40-year-high inflation rate, which considerably raised the cost of consumer goods. This year's more minor increase may feel inadequate for some, especially in light of the continuing effects of inflation on retirees' purchasing power.
Martha Shedden, president of the National Association of Registered Social Security Analysts, acknowledged this concern, saying, "Compared to last year's 8.7% increase, this is going to feel small, and the perception is that it's not keeping up with the inflation and the higher costs that retirees are still experiencing."
In addition to these concerns, the impending increase in Medicare premiums for 2024 may offset the benefits of the Social Security COLA. While traditional Medicare rates have yet to be announced, Medicare Advantage plans are expected to remain stable.
This potential rise in healthcare costs highlights the ongoing challenges that many retirees face in managing their finances. Despite these challenges, senior advocates have welcomed the annual Social Security adjustment.
Jo Ann Jenkins, CEO of AARP, commented on the significance of this increase, stating, "Retirees can rest a little easier at night knowing they will soon receive an increase in their Social Security checks to help them keep up with rising prices," according to ABC News.
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Sustaining Social Security and Fair COLA Calculation
It's essential to understand the financing of Social Security, which relies on payroll taxes collected from workers and their employers. In 2024, the maximum earnings subject to Social Security payroll taxes will increase to $168,600, up from $160,200 in 2023.
Retirees who rely solely on Social Security income are not subject to taxes on that income, providing some financial relief. Nevertheless, the long-term sustainability of the Social Security program remains a concern.
The annual Social Security and Medicare trustees report from March 2023 revealed that the program's trust fund may be unable to pay full benefits starting in 2033. If the trust fund is depleted, the government could only pay 77% of scheduled benefits.
There have been legislative proposals to address the financial shortfall of Social Security, but these proposals have faced challenges in making it past committee hearings. Public sentiment, as indicated by a March poll from The Associated Press-NORC Center for Public Affairs Research, shows that most US adults oppose Medicare or Social Security benefits cuts.
The method of calculating COLA using the Consumer Price Index (CPI) has also raised questions. Some advocate for using the CPI-E, an index that measures price changes based on the spending patterns of older people, focusing on costs like healthcare, food, and medicine.
Any change in this calculation would require congressional approval, which has been challenging due to longstanding inaction on Social Security reform. Amid these challenges, the COLA remains crucial for beneficiaries like Alfred Mason, an 83-year-old Louisiana resident who values any increase that can help them navigate challenging financial times, Mail Online reported.
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