Nebraska financial planner tells us more about the Social Security cost-of-living adjustment for 2024.

We had an opportunity to speak with Tim Moomey from FSB Investment Center regarding the Social Security cost of living adjustment for 2024.

For those who are unaware, the Social Security cost-of-living adjustment will be 3.2% in 2024.

This is a decrease from the massive boost of 8.7% implemented this year and 5.9% in 2022. However, the increase, which was announced by the Social Security Administration on October 12th, is still higher than the average of 2.6% seen over the past 20 years.

This rise will result in an average increase of about $50 per month for the 66 million people who receive Social Security, as well as the 7.5 million who receive Supplemental Security Income, according to the administration.

Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League said,

Social Security benefits are really only designed to replace about a third or less of our income, so when we have a COLA, even when it’s higher than average like 3.2%, the dollar amount of this increase is pretty modest. Even though the inflation rate or the rate of price changes has come down, some prices don’t. Things like rent, your medical costs, they go up and they rarely come down.

The 3.2% increase in the Social Security COLA for 2024 is a sign of normalcy and that inflation is getting under control. These are hopeful signs for everyone. This increase is only slightly above the Social Security Administration’s long-term average COLA.

The decrease in the size of the annual COLA follows a decrease in core inflation, but that doesn’t necessarily reflect the financial realities for people living on Social Security,

According to Jim Sumpter, president of CMC Financial in an email,

While it is nice that there will be an increase, it could be less than what clients are spending money on. Many items still cost much more than the overall increase which could be a net deficit to many seniors. For example, out-of-pocket medical expenses seem to be a large bill for many seniors, and overall inflation on many of those costs is much greater than the 3.2% SSA increase. These clients could likely see a net deficit.

According to a report by The Senior Citizens League, 68% of those receiving Social Security benefits reported that their household expenses have increased by 10% compared to the previous year, despite a slowdown in inflation. More than half of the respondents expressed concern that their Social Security payments would not be enough to cover their future living expenses.

It would be wise for recipients to check whether their tax liabilities on Social Security benefits have increased. The increases from the past two years may have pushed many people into higher tax brackets, resulting in them paying taxes on their SS income.

It is recommended that you consult with your financial advisor and tax professional for further information. Please ensure that you have received adequate guidance from these experts before making any important financial decisions.