For many seniors, Social Security is their primary source of income. Data gathered by the Social Security Administration shows that the minimum of 50% of income in around half of homes with an individual 65 years of age or older comes from the program. Millions of senior citizens might be impoverished if Social Security hadn’t been created.
Given that, a large number of seniors depend on Social Security to cover their costs of living, an essential component of the payouts is the annual cost-of-living adjustment or COLA. Depending on the amount that costs rise in the 3rd quarter of each year, recipients get larger monthly payouts. Even though the third quarter of 2024 hasn’t arrived yet, experts are speculating about what the COLA might be.
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The Senior Citizens League revised its prediction in light of the May Consumer Price Index (CPI) report. It currently projects that Social Security benefits for seniors will increase by 2.57% in 2019.
That is significantly less than the 3.20% COLA seniors earned current year and a decrease from its earlier projection of 2.66%. However, retirees may find a reduced COLA to be a welcome surprise.
The largest obstacle facing Social Security
Higher-than-average inflation is indicated by a higher-than-average COLA. Furthermore, inflation has done enormous damage to Social Security’s value.
It has already reduced the benefits’ financial value. The cost of living has increased much more quickly for the typical retiree who began receiving payouts in 2000 than their monthly payouts have. According to the Senior Citizens League, their ability to buy has decreased by almost 36%. The past few years high inflation only made that worse.
The yearly COLA is always determined by the Social Security Administration using a backward-looking methodology. Since it is impossible to predict future inflation rates, the Social Security Administration (SSA) simply raises benefits following the rate at which living expenditures increased the previous year. This implies that during times of high inflation, retirees are likely to increase their benefit checks.