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Social Security Cost of Living Adjustment (COLA) increases have historically been a lifeline for retired Americans, helping them cope with rising inflation and maintain their standard of living.
The Social Security COLA for 2024 is anticipated to be substantially smaller due to declining inflation rates, which would have a particularly negative impact on boomers, the group born between 1946 and 1964.
Having contributed more to Social Security over the years and heavily relying on it as a primary source of income, boomers are likely to feel the pinch of reduced COLA adjustments. This article examines the potential impact of the 2024 COLA on boomers and explores the challenges they may face in the current economic climate.
The Senior Citizen’s League predicts that the Social Security COLA increase for 2024 may be just 3.1%, a substantial drop compared to the 8.7% increase in the previous year, which was the largest gain in four decades. This forecast is a result of reduced inflation rates in the third quarter (July, August, and September) of the prior year, thanks to rate adjustments made by the U.S. Federal Reserve.
While a 3.1% increase is still an improvement, boomers are poised to be hit harder than other retired Social Security recipients due to a combination of factors. First, they have contributed more to Social Security over their working years, making the reductions in COLA adjustments more pronounced in their benefits.
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Social Security Benefits vs. Rising Living Costs
Additionally, boomers typically rely more heavily on Social Security as a primary source of income compared to previous generations.
The reduced COLA increase could have significant implications for boomers who are already facing financial challenges. During previous months of rapid inflation, many boomers found themselves in debt and struggling to overcome financial burdens. A smaller COLA increase in 2024 may hinder their ability to pay down debts incurred during these inflationary times, potentially exacerbating financial stress.
Moreover, historical data shows that Social Security benefits have not kept pace with the rising costs of essential goods and services. Between January 2000 and February 2023, Social Security benefits increased by only 78%, averaging a meager 3.4% annually, while living expenses like food, utilities, and other goods and services surged by 141.4%, averaging 6.2% annually. This divergence highlights the growing disparity between the rising cost of living and Social Security benefits.
Boomers with higher median earnings are expected to receive larger Social Security checks. Based on projections by the Social Security Administration, the median earnings for boomers are estimated to range from $41,000 to $44,000.
In contrast, the Silent Generation, which preceded boomers, had median incomes between $28,000 to $38,000. This income disparity means that the smaller COLA increase will have a more significant impact on boomers who have higher Social Security benefits.
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Source: GOBankingRates via MSN
