After another year, Social Security beneficiaries can get ready for the cost-of-living adjustment (COLA) statistic announcement happening today. Each year, beneficiaries eagerly await to hear the annually revised COLA statistic. COLA informs Social Security by how much benefits must be increased by each year to keep up with increased costs of living. Since its inception, COLA has averaged at an increase around 2% each year.
Expected COLA is less than what has been seen in the past four years
Since the COVID19 pandemic, COLA has been on the higher end of its historical performance. The increase last year was at 3.2% while 2022 saw a decade high of 8.7%. 2021 saw an adjustment of 5.9% in the wake of the initial year of COVID19. After four years, the Federal Reserve is predicting that cost-of-living is finally stabilizing and is reverting to strategies to prevent a recession and to encourage economic spending.
Experts predicate that COLA should be around the 2.5% mark. While some beneficiaries may be disappointed by the lower COLA adjustment, it is important to remember that a lower COLA statistic is good news as it suggests that cost-of-living in general is also decreasing or stabilizing. Beneficiaries should not focus on how much more money they are getting, but should rather look at COLA as an indication as to how the economy is doing in general.
The new COLA adjustment will be available on the Social Security website
Beneficiaries can access the new COLA announcement through the press release page on the Social Security website. While all beneficiaries will see their payments increase by the same amount in the new year, it is important to remember that everyone’s payments differ depending on how much you put in while working, for how long, and for how long you delayed claiming your benefits. Beneficiaries should therefore refrain from comparing how much their payments have increased by as the amounts will always differ.
Payment increases according to the new COLA statistic will begin January 2025. COLA is usually released around October of the previous year due to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) announcement occurring in September generally. The COLA statistic is directly informed by the CPI-W, therefore the announcement is made shortly after the CPI-W has been released.
Some beneficiaries have previously criticized that COLA is determined based on the CPI-W due to the somewhat skewedness of the data. The CPI-W is measured according to consumer spending, but these spenders are those who are wage-earners. Social Security beneficiaries as part of the Old-Age fund are generally retired individuals and therefore, their spending habits are often underrepresented in the CPI-W and therefore not always accurately accounted for in the COLA statistic.
Struggling beneficiaries can access other government benefits
While Social Security is intended to supplement retirement income, the reality is that most beneficiaries solely live off of their Social Security and often SSI income in addition. If you are a beneficiary who is struggling to make ends meet with your social security, there a number of government food, housing assistance, utility assistance, and healthcare assistance programs which can ensure that you have access to care.
Current wage-earners needs to ensure that they are preparing for retirement as early as possible. Financial advisors recommended that you always ensure that you have saved up an emergency fund before you start investing. Investment programs are a great way to supplement your future Social Security income in the future. With the power of compound interest, even a small amount invested each month can make significant addition to your retirement savings.
