The cost of living adjustment (COLA) in 2022 and 2023 for beneficiaries of the U.S. Social Security program were at the highest levels since 1981. Largely driven by historic levels of economic inflation, the heftier benefits were still outpaced by rising prices last year, but did provide beneficiaries with more cash.
But with inflation moderating — despite prices not falling — the COLA for 2024 could be much lower than it has been over the past two years, according to analysis from the Senior Citizens League (TSCL).
“The 2024 COLA could be around 3.1%,” said Mary Johnson, TSCL’s Social Security and Medicare policy analyst in a briefing document released this month.
At the end of 2021, about 70 million U.S. Social Security beneficiaries were given a 5.9% COLA increase, which at the time was the largest adjustment to Social Security benefit payments in the last 40 years. This change stemmed from an annual increase in the Consumer Price Index (CPI).
The Social Security COLA then rose 8.7% in 2023 to an average of $1,827 a month, again marking the highest COLA increase since 1981.
In spite of those historically large increases, rampant inflation throughout 2022 caused last year’s Social Security benefit increase to fall short, according to research from TSCL. And, inflation caused prices to outpace the payment increase every month in 2022, despite an average boost of $92.30, which increased the average monthly benefit to $1,656.30.
In turn, the buying power of Social Security benefits is at risk, according to TSCL.
“One year ago, [our] study found that Social Security benefits lost 40% of buying power since 2000,” the May 2023 briefing states. “That was the deepest loss in buying power since the start of this study in 2010. This year the study found that the loss of buying power slightly improved — by four percentage points — to 36%. However, that is still one of the deepest losses recorded by this study, exceeded only by the loss in 2022.”
In addition, the Social Security program continues to be a source of political debate by federal lawmakers. With projections expecting the Social Security trust fund to be exhausted at some point in the 2030s, lawmakers have debated ways to improve its solvency, including by raising the retirement age, which experts say could negatively impact today’s seniors.
The reverse mortgage industry and some financial professionals have aimed to position the products as a hedge against Social Security issues, whether it’s increasing the amount of cash flow for seniors or to delay the taking of benefits until age 70 to increase the monthly payout.
I'm an expert in social security policy and economic trends, with a deep understanding of the U.S. Social Security program, cost of living adjustments (COLA), and their impact on beneficiaries. My expertise is grounded in a thorough analysis of historical data and ongoing research, allowing me to provide insightful commentary on the complex dynamics shaping the landscape of social security benefits.
The article discusses the COLA for U.S. Social Security beneficiaries in 2022 and 2023, highlighting that these adjustments were at their highest levels since 1981. The primary driver behind this substantial increase was the historic levels of economic inflation during that period. Despite the noteworthy boost, the benefits were still outpaced by the rising prices, leading to concerns about the buying power of Social Security benefits.
In 2022, approximately 70 million Social Security beneficiaries received a 5.9% COLA increase, the largest adjustment in the last 40 years at that time. However, the rampant inflation in 2022 caused the benefit increase to fall short, resulting in prices outpacing the payment increase every month. The average monthly benefit in 2022 increased to $1,656.30, reflecting an average boost of $92.30.
The Senior Citizens League (TSCL) predicts that despite inflation moderating, the COLA for 2024 could be much lower, around 3.1%. This projection is based on analysis by Mary Johnson, TSCL's Social Security and Medicare policy analyst. The concern raised by TSCL is that the buying power of Social Security benefits remains at risk, citing a study that found a 36% loss in buying power, which is a slight improvement from the previous year but still a significant issue.
The article also touches upon the ongoing political debate surrounding the Social Security program among federal lawmakers. Projections suggest that the Social Security trust fund may be exhausted in the 2030s, prompting discussions on ways to improve its solvency. Proposals include raising the retirement age, a move that experts argue could negatively impact current seniors.
Furthermore, the article mentions the reverse mortgage industry and financial professionals positioning their products as a hedge against Social Security issues. Strategies such as increasing cash flow for seniors or delaying the claiming of benefits until age 70 to boost the monthly payout are suggested.
In summary, my expertise allows me to contextualize the challenges faced by Social Security beneficiaries, considering historical trends, economic factors, and potential policy changes on both the macro and micro levels.
