While most Americans can expect Social Security Cost of Living Adjustment (COLA) increases to be much smaller in 2024 thanks to reduced inflation, boomers — the generation born between 1946 and 1964, some of whom are already collecting Social Security — might be hit hardest. They stand to lose more than the Greatest Generation simply because they paid in more and also rely on it more than other retired Social Security recipients.
The Senior Citizen’s League predicts that next year’s COLA increase could be just 3.1%, less than half of this year’s 8.7%, which was the largest gain in four decades. The COLA is calculated based on inflation in the third quarter — July, August and September — of the prior year. Thanks to rate adjustments by the U.S. Federal Reserve, inflation has slowed over the last several months.
But prior months of rapid inflation left many people in debt and struggling to dig out of financial holes. A smaller COLA increase could make it harder for retirees to pay down debt accrued during these inflationary times. Additionally, COLA increases don’t necessarily keep pace with inflation.
Between January 2000 and February 2023, Social Security benefits increased by just 78%, averaging just 3.4% annually, while food, utilities and other goods and services increased by 141.4%, averaging 6.2% annually, The Senior Citizens League reported, citing data from the U.S. Bureau of Labor Statistics.
Plus, smaller increases will not have as much effect on someone whose Social Security benefits are based on a median income of $28,000 to $38,000 for the Silent Generation that preceded boomers, based on Social Security Administration projections. The median earnings of boomers were predicted to range from $41,000 to $44,000, which would result in larger Social Security checks. The Silent Generation also typically has pensions to rely on to fund part of their retirement, whereas many boomers do not.
While an increase of 3.1% for Social Security is still an increase, it’s not likely to keep pace with inflation. Boomers who rely on Social Security may have to look into investments or other sources of income to continue to make ends meet in these challenging times.
More From GOBankingRates