Social Security beneficiaries acquired the largest Cost-of-Living Adjustment (COLA) in decades this year but in an unexpecting twist, are expected to receive a much smaller raise in 2024.

Said to be the worst inflation the United States has faced since the 1970s, the 2022 U.S. economy put many Americans in difficult financial standings. The rising cost of gas, groceries and monthly utilities were equally matched with Social Security recipients whose 5.9 percent cost-of-living (COLA) benefits failed to offset inflation.

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What is “COLA”?

Social Security’s annual COLA are intended to protect buying power of benefits by ensuring payout increases at the same pace as inflation. Benefits recovered the following year with an 8.7 percent COLA in 2023 – the largest raise for retired workers in more than 40 years. However, after receiving two large COLAS in two consecutive years, beneficiaries can most likely expect a much smaller raise next year.

The official 2024 COLA will not be announced until October when third-quarter inflation levels are calculated. With new costs associated with Medicare, some Social Security beneficiaries could be at risk of seeing close to zero growth in their 2024 benefits.

The Senior Citizens League estimates that Social Security recipients will only receive a 3 percent COLA in 2024.

Now, inflation has cooled off this summer compared to a historic 9 percent inflation rate during the first half of 2022 – we’re currently at a 4.5 percent inflation rate average in 2023. Social Security benefits are gaining a significant amount of buying power with predictions that this pace of recovery will “recoup all the buying power they lost last year.”

What is Social Security?

Social Security is a government program that collects taxes from working Americans and distributes the funds to qualifying disabled and retired workers to help them and their families remain financially secure.

Someone must typically earn 40 credits to qualify for Social Security, and according to The Motley Fool, a credit in 2022 is defined as $1,510 in earned income. This amount rises to $1,640 in 2023. One may earn up to four credits per year.

Three main types of Social Security benefits:

  • Retirement: Workers 62 years and older who’ve earned at least 40 credits
  • Disability: For adults 18 years or older unable to work due to physical or mental disability
  • Survivor: For family members of deceased workers who qualified

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