When Karla Abbott thinks about retiring next spring, she finds comfort in the fact that millions of people who get Social Security get an increase in their monthly payments every year. The new boost will be much smaller than this year’s 8.7%, though, because consumer prices are going down.
Analysts think that the change will be about 3.2% in 2024.
The 61-year-old woman from Sioux Falls, South Dakota, has been saving for retirement since she was 18 years old. She has been a nurse for 38 years. And she’s not sure if it will be enough, even with her Social Security checks.
Still, she said that the yearly cost-of-living raises from Social Security help her and her husband plan for the years when they won’t be working.
“The increases will be helpful, certainly to those of us who are still doing the math on retirement,” she said.
The office changes its perks every year to account for inflation. The cost of living adjustment, or COLA, for 2024 will be announced on Thursday.
More than 71 million people, including disabled people with low incomes, get benefits from the program every year. The benefits are worth about $1.4 trillion.
Charles Blahous, a former trustee for Social Security, said that the yearly COLA news is a reminder of how tight the program’s funds are.
“This is an important system, and we need to restore its solvency, because if lawmakers can’t do that, then Social Security and its basic financing design would have to be abandoned,” he said.
The yearly report on Social Security and Medicare trustees, which came out in March, said that starting in 2033, the program’s trust fund will not be able to pay full payments. The study said that the government will only be able to pay 77% of planned payments if the trust fund runs out.
The Bureau of Labor Statistics’ Consumer Price Index is used to figure out the COLA. However, some people want the agency to use a different index instead. They want the CPI-E, which tracks changes in prices based on how much money seniors spend on things like food, medicine, and health care.
The Senior Citizens League’s Mary Johnson is an expert on Social Security and Medicare policy. She says that her group supports the Social Security Administration using whichever rate is higher to best protect older people from inflation.
Congress would have to agree to any changes to the estimate. But nothing has been done for decades to fix Social Security, and the House is still deadlocked after Speaker Kevin McCarthy was fired. Seniors and people who support them don’t think any kind of change will happen soon.
“I feel like there’s a lot of distraction in Washington,” Abbott said. “Does anyone even care about what is happening with Social Security? I have no clue why they can’t come together on something so important.”
The rising cost of living has a big effect on Louisiana citizen Alfred Mason, who is 83 years old. Mason said, “We welcome any increase because it helps us get through what we’re going through.”
Given that prices are still very high, he said that any extra money “would be greatly appreciated.”
People who work and their companies pay payroll taxes that pay for Social Security. For 2023, the most money that will be taxed by Social Security is $160,200. This is more than the $147,000 that was the limit in 2022.
It has been suggested that the government make changes to Social Security, but these ideas have not gone beyond the review stage.
Jo Ann Jenkins, CEO of the AARP, said the organization “is urging Congress to work in a bipartisan way to keep Social Security strong and to provide American workers and retirees with a long-term solution that both current and future retirees can count on.”
“Americans work hard to earn their Social Security, and it’s only fair for them to get the money they deserve.”
Johnson, the Senior Citizens League’s analyst, said Congress “does not have any record of successfully and timely making changes to Social Security,” and when there were reforms to the program in 1983 — “we were far less divided.”
“Certainly the situation today is so contentious, simply getting there now is a huge effort.”