Seniors should start preparing now to avoid being caught off-guard by the upcoming changes. In 2024, inflation presented considerable difficulties for workers and retirees, but it has been decreasing this year.
While it’s still costly to fill up grocery carts and cover essential expenses, such as utilities, inflation is not as rampant as a year ago. This news is great for consumers as it will boost their spending and cash flow. From the perspective of Social Security COLAs, the outlook isn’t as good.
Next year’s cost-of-living adjustment (COLA) may be a lot less impressive. At the beginning of 2024, seniors on Social Security experienced an 8.7% increase in benefits, the largest COLA in decades. Based on the current inflation rates, it is expected that the COLA for 2024 will be notably reduced.
COLAs for Social Security are determined using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), a subset of the widely tracked Consumer Price Index. In June, the CPI-W rose by 2.3% on an annual basis. As a result, the nonpartisan Senior Citizens League is projecting a 3% COLA for 2024.
This projected COLA is not the lowest on record, as there have been years without any COLA. Nevertheless, it is substantially lower compared to the 8.7% increase seniors received at the beginning of 2024.
Seniors need to be proactive in preparing for the potential impact of a lower COLA in 2024. Although a smaller COLA indicates less significant rises in living costs, it’s crucial for seniors on Social Security to be aware of the situation and plan accordingly. If possible, they should consider saving additional money for the remainder of 2024.
In fact, it is highly recommended that seniors build up their savings in the coming months for one important reason. While the cost of Medicare Part B decreased this year, there’s no guarantee that the same will occur in 2024. If the cost of Medicare Part B rises, it will erode the limited COLA received by seniors on Social Security. Therefore, it is especially important to accumulate cash reserves to account for this possibility.
The Social Security Administration will announce next year’s COLA in mid-October, as it relies on third-quarter CPI-W data. However, given the current trend of inflation levels, a lower COLA seems inevitable. Seniors who recognize this and prepare accordingly can avoid financial hardship resulting from a smaller raise.