Farewell to the cost of living adjustment in 2024

The Social Security Administration has announced that Social security audits will change once again before the end of the year. Every day we get closer to the final number that will change Social Security and its beneficiaries. Next month, you can kiss all expectations about the COLA (cost of living adjustment) goodbye, but for now, it's wise to take a closer look at what's happening and prepare your wallet for the good or bad news. Read on to learn more.

Why is Social Security changing your checks again?

Social Security is a set of programs designed to help Americans avoid poverty and meet their basic needs when an unexpected or unavoidable situation arises. According to this mission, the amount of money each program provides must be enough to cover those bills. However, the economy is not a static system; it changes every day. Adjustment is needed to keep up with the changes and to Purchasing power of people. This is done by calculating and implementing an index commonly known as COLA. To simplify the process, adjustments are made each year to reflect changes in the economy and prepare for whatever might happen next.

How will the social security changes be implemented?

Essentially, the COLA is calculated in October based on the average of CPI-W (Consumer Price Index for Urban Wage Earners and Clerical Workers) for July, August, and September of the previous year. This number is compared to the same calculation from the previous year, and the difference is what we call the COLA. Once the COLA is calculated, Social Security uses it to adjust the amount each beneficiary receives and other values, such as the income limits that define who can apply for their programs or to adjust the credit values ​​assigned according to your Social Security tax contributions. Therefore, the impact of the COLA is wide-ranging and complex.

How much will your social security increase as a result of this change?

Since there is no definitive value for the COLA, you can take a conservative approach and calculate based on your monthly income, adjusted for the current estimates of how this index will develop. The latest COLA projections from the TSCL (Senior Citizens League, an organization that advocates for the rights of senior citizens) indicate that the index will increase from 2.57% to 2.63%. This can be interpreted as good or bad news, depending on which part of the issue you analyze. Good, because as a senior citizen, you have a larger nominal increase, which means that the amount you will receive next year will be higher.

Remember that the COLA is closely related to the inflation rate. Therefore, an increase in inflation will also bring an inherent decrease in the purchasing power of the economy, and this will also mean that you may be faced with a situation where you have more money but can end up buying less. However, it is important to remember that the effect of the COLA is not directly calculated in this way, but serves as a reasonable estimate. Here we show different results following this procedure, depending on the portfolio of programs administered by Social Security and the amounts for July 2024.

Old

disability

Survivors

SSI