Discover the Impact of Next Year’s Social Security Raise: A Closer Look at a More Modest Increase

Millions of Social Security recipients will experience a 3.2% increase in their benefits in 2024, which is significantly lower than the previous year’s extraordinary boost. The Social Security Administration announced on Thursday that the cost-of-living adjustment (COLA) will result in higher monthly payments for the average recipient starting in January. According to the Associated Press, approximately 71 million people, including retirees, disabled individuals, and children, receive Social Security benefits.

AARP CEO Jo Ann Jenkins expressed support for the adjustment, acknowledging that older Americans still face financial challenges when purchasing everyday essentials like groceries and gas. Social Security is funded by payroll taxes levied on workers and their employers. For 2023, the maximum earnings subject to Social Security payroll taxes increased to $160,200 from $147,000 in 2022. However, the program is projected to encounter significant financial difficulties in the future. The annual Social Security and Medicare trustees report, released in March, stated that the program’s trust fund will not be able to pay full benefits starting in 2033. If the trust fund becomes depleted, the government will only be able to cover 77% of scheduled benefits.

Despite the urgent need to address the program’s financial shortfall, legislative proposals aimed at strengthening Social Security have struggled to advance beyond committee hearings. The COLA itself is calculated using the Consumer Price Index (CPI) published by the Bureau of Labor Statistics. However, there are suggestions to consider using a different index, the CPI-E, which specifically measures price changes based on the spending patterns of the elderly, such as healthcare, food, and medicine expenses. Any changes to the calculation method would require approval from Congress.

(Read more Social Security stories.)