Retirees Face Mixed Prospects as Social Security COLA for 2024 Reveals Both Positive and Negative Outcomes

Social Security beneficiaries can expect a 3.2% cost-of-living adjustment (COLA) in 2024, which will provide them with a little extra income. On average, retired workers will receive an additional $59 per month next year. However, this increase is not as significant as the pay bump beneficiaries received in 2023, where the average retired worker saw an additional $146 per month.

Despite the upsides and downsides of the 2024 COLA, retired workers should also consider other factors such as potential Social Security benefit cuts and the purchasing power of their benefits.

One positive aspect is that the 2024 COLA will not bring benefit cuts closer. In 2023, beneficiaries received an 8.7% COLA, the largest increase since 1982. However, this accelerated the timeline for potential benefit cuts. The Social Security Trustees projected the trust fund to become insolvent in 2035, based on a 3.8% COLA in 2023. But the actual increase exceeded expectations, moving the projection of insolvency to 2034. With the 2024 COLA estimated at 3.2%, the trustees slightly overestimated this time, giving Congress a full decade to find a solution to Social Security’s financial problems.

On the other hand, the 2024 COLA may not fully cover inflation. The annual COLAs are meant to compensate beneficiaries for the buying power they lost in the previous year. In 2023, inflation reached a four-decade high, resulting in the largest COLA in four decades. The 3.2% COLA in 2024 should reimburse beneficiaries for the buying power lost to inflation in 2023. However, recent data shows a concerning trend. Inflation, as measured by the CPI-W, reached a multiyear low of 2.3% in June 2023 but increased to 3.6% in September. If inflation continues to accelerate or remains unchanged, the 3.2% COLA might not fully offset the impact of rising prices, resulting in a loss of buying power for Social Security beneficiaries.

Unfortunately, it is a wait-and-see situation, and beneficiaries should hope for the best while preparing for the worst. This may involve budgeting more frugally during the upcoming holiday season.