Social Security recipients are on pins and needles, waiting for the announcement of the 2024 cost-of-living adjustment (COLA), which is set to be released on October 12. This year’s COLA is likely to be approximately 3%, a significant decrease from the unusually high 8.7% adjustment observed this year. However, if the September inflation rate is particularly low, the COLA might fall below 3%.
The official COLA computation is based on the third-quarter percentage rise in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The increases in CPI-W for July, August, and September are combined, averaged, and compared to the prior year’s Q3 average. This percentage difference determines the COLA amount, which will be included in Social Security benefits beginning in January 2024.
According to recent inflation statistics, the CPI-W increased by 2.6% year over year. However, due to somewhat higher monthly inflation, most projections anticipate the 2024 COLA at roughly 3%. According to the Senior Citizens League, a 3% COLA would increase the average monthly Social Security payout by $53.70.
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Potential Impact of Catastrophic Hurricanes on the 2024 COLA Increase
There’s also a risk that the 2024 COLA will jump much more as a result of catastrophic hurricanes. These storms have a tendency to interrupt oil and gas production and delivery, raising gas prices–an important component of the inflation index used to calculate the Social Security COLA. Researchers estimate a 60% chance of a “above-normal” Atlantic hurricane season, which might have an additional influence on the COLA.
While a raised COLA is good news for Social Security recipients, it may have ramifications for the whole community. “While it’s great news for seniors to get a bump in their Social Security checks, it’s important to remember that this increase is tied to inflation,” says financial analyst Aaron Crowe. If inflation is strong, prices for products and services are likely to be high as well, making it difficult for seniors on fixed incomes to make ends meet.”
Given the uncertainties, retirees should consider recession-proofing their retirement. This involves practicing frugality and looking for ways to supplement one’s retirement income, as financial expert Kevin Gallegos suggests: “Retirees should consider taking on part-time work or starting a small business to help supplement their retirement income.”
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Source: Marca
