How Social Security’s COLA Predicted for 2024 Could Affect Retirees

How Social Security’s COLA Predicted for 2024 Could Affect Retirees

by | Accounting News, News, Retirement, Retirement Savings

Every October, retirees and individuals planning for their retirement expect the Social Security Administration to announce the cost-of-living adjustment (COLA) for the following year. The COLA aims to counteract the eroding effects of inflation on retirees’ purchasing power. In this article, we go over how the anticipated COLA for 2024 could affect American retirees.

Understanding the COLA

The COLA for Social Security benefits is determined each year by using a specific formula that takes into account changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The CPI-W is a measure of inflation that reflects the average change in prices paid by urban consumers for a predetermined “market basket” of goods and services. The goal of COLA is to ensure that Social Security benefits keep up with the rising cost of living, so that the purchasing power of beneficiaries is maintained over time.

Anticipated COLA for 2024

The exact COLA for 2024 will not be officially announced until October, but early predictions suggest a raise of 3% for 2024. That would boost the average Social Security retirement benefit by about $55 a month in 2024.

COLA Fluctuation

A 3% raise would be a significant shift from the previous two years, which saw COLA adjustments at 5.9% and 8.7%. These adjustments raised the average retirement benefit by $92 in 2022 and $146 this year. Compared to these percentages, some might consider a 3% raise a disappointment, but it’s important to remember that annual COLA calculations are meant to offset the price increases consumers have faced since the previous year’s COLA was determined. Therefore, a 3% raise would be a sign that inflation is cooling.

It’s also important to point out that a 3% raise is still above average. Looking at the last two decades, the average inflation adjustment for Social Security benefits was 2.6%, and three of those years – 2010, 2011, and 2016 – saw no adjustment at all. Even so, when comparing this year’s 8.7% hike to the projected 3% for next year, retirees on a tight budget will feel the difference.

How Social Security Beneficiaries Can Still Benefit

Retirees may be temporarily profiting from the COLA raises in these latter years, and those who are able to increase savings for the remainder of 2023 are in a position to benefit. With 15-year highs in interest rates on certificates of deposit and money market savings accounts, retirees may want to think about transferring available assets to these safe saving vehicles as they offer a better rate of return than traditional savings accounts.

Your Social Security Check Is NOT in the Mail

by | Accounting News, Bookkeeping, Healthcare, IRS, Tax Planning - Individual

By Ken Berry, AccountingWeb.com

Do you have clients who still receive their Social Security checks in the mail? Mail carriers won’t be dropping them in your clients’ mailboxes in the near future. The government has announced it will no longer be issuing paper checks, so recipients will have to access their funds electronically. They’ll have until March 1, 2013, to make the switch.

This change already affects older baby boomers who recently retired. As of May 1, 2011, new retirees are required to choose one of two electronic payment methods. Approximately 80 percent of Social Security recipients currently receive their payments electronically.

A retiree making the switch can have Social Security payments deposited directly into a bank or credit union or loaded on a prepaid debit card. To use direct deposit, the routing transit number and account number for the bank or credit union must be provided. Clients can sign up at GoDirect.org. Alternatively, they can call the U.S. Treasury Electronic Payment Solution Center at (800) 333-1795 or ask about the direct deposit feature at a local banking institution.

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Social Security recipients who don’t choose an electronic payment option by March 1, 2013, will receive their payments via a Direct Express Debit MasterCard account. More than 1.5 million individuals have signed up for these prepaid debit cards since they first became available in 2008.

As with a bank account, fees may be charged for certain debit card transactions. For example, individuals may make purchases at retail locations, receive cash back with a purchase, and take one withdrawal per month at one of the in-network ATMs – which include Comerica Bank, Charter One, Privileged Status, Alliance One, PNC Bank, MasterCard ATM Alliance, and MoneyPass – completely free of charge. However, if someone makes more than one ATM withdrawal per month at an in-network ATM, it costs 90 cents per withdrawal. Additional fees, which can be as much as $3, also apply to withdrawals at out-of-network ATMs. Receiving a paper statement in the mail will cost another 75 cents per month.

By eliminating printing and postage costs for Social Security checks, the government expects to save $1 billion over the next ten years.