Financial Planner: Preparing for the next Social Security cost of living adjustment
by NTV News
FILE – The U.S. Social Security Administration office is seen in Mount Prospect, Ill., Oct. 12, 2022. About 71 million people including retirees, disabled people and children receive Social Security benefits. (AP Photo/Nam Y. Huh, File)
The Social Security cost of living adjustment will be 3.2% in 2024, which is down from the massive boost of 8.7% implemented this year and the 5.9% in 2022.
Financial Planner Tim Moomey joined NTV to talk about about the bigger picture and tax implications.
“However, the increase, which the Social Security Administration announced on Oct. 12, is higher than the average of 2.6% seen over the past 20 years. The rise amounts to an average increase of about $50 a month for the 66 million people who receive Social Security, as well as the 7.5 million who get Supplemental Security Income, the administration said.
“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 really 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.’
“She goes on to say, ‘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.
“He says, ‘While it is nice that there will be an increase, it could be less than what clients are actually spending money on. Many items still cost much more than the overall increase which could be a net deficit to many seniors,’ Sumpter said. ‘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.’
“A report earlier this year from The Senior Citizens League found that 68% of people on Social Security said that their household expenses have been 10% higher than a year prior, even as inflation has slowed. More than half of people surveyed said they were worried that Social Security payments would be insufficient in the future to cover their costs of living.
“Also, it seems that it would be very logical for recipients to check to see if their tax liabilities on Social Security benefits will be higher than usual. The increases from the past 2 years may have put more people into the brackets where they would be paying taxes on that SS income.
“Check with your financial advisor and tax person for more information.”