In 2024, Social Security Benefits Will Increase by 3.2%

In 2024, Social Security Benefits Will Increase by 3.2%

The Social Security Administration said on Thursday that in order to assist them keep up with inflation, the checks that more than 71 million Americans receiving Social Security benefits would get an increase of 3.2 percent in 2019. That is a substantial decrease from the record-breaking 8.7 percent increase in 2023 amid raging inflation, but it is still more than the usual cost-of-living adjustment.

The average monthly payout for retired workers will increase by $59 to $1,907 from $1,848 starting in January.

More than three-quarters of Social Security payments are given to retirees and their dependents, but millions of other beneficiaries—disabled workers, workers’ survivors, and low-income individuals participating in the Supplemental Security Income program—will also benefit from the rise. Experts claimed that the most recent increase in benefits surpasses the average of 2.6 percent throughout the previous 20 years.

Although prices have not decreased much since they spiked due to supply constraints and interruptions caused by the epidemic, they are still high. Through a series of actions, the Federal Reserve has raised its benchmark interest rate to the highest level in 22 years in an attempt to contain inflation.

Lower- and middle-class retirees, many of whom lack employment retirement plans such as 401(k)s and the matching payments from employers that sometimes accompany them, rely heavily on Social Security benefits. However, Social Security’s lifetime inflation adjustments—which help seniors preserve their purchasing power as housing, food, and medical care expenses rise—are what actually set it apart from other retirement income sources. This is particularly important if a household’s income is mostly or entirely derived from Social Security.

Rising Medicare Part B premiums, which automatically take from Social Security payments and cover medical visits and outpatient hospital treatments, sometimes eat up a portion of the additional money that retirees have. The Medicare board of trustees predicted in its annual report to Congress that rates would increase from $164.90 to $174.80 in 2024.

Assuming that is accurate, the average retiree would still have some money from the cost-of-living adjustment, according to Mary Johnson, a policy analyst for Social Security and Medicare at the Senior Citizens League, an organization that advocates for senior citizens.

Beneficiaries get rises after they have already experienced price increases since any prospective cost-of-living adjustment must be included into benefits at the beginning of the new year. The Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, is used to compute the COLA. Social Security compares the average inflation rate for the current year’s July, August, and September to the same time last year. A salary raise follows any increase.

Considerable discussion has long surrounded the question of whether the C.P.I.-W index—which measures a basket of goods and services bought by working people, not retirees—is the most reliable indicator to determine Social Security adjustments. As retirees often spend a larger portion of their income on housing and healthcare, the Consumer Price Index for the Elderly, or C.P.I.-E., an experimental measure that covers adults 62 and older, may be a better indicator of this trend.

According to Mrs. Cunt, the COLA adjustment would be around 1% greater than the hike that was revealed on Thursday. However, the C.P.I.-E. does not necessarily result in a greater inflation adjustment, and in recent years, the gap between the two indexes has shrunk.

Furthermore, some analysts argue that the impending Social Security funding shortfall—which, if ignored, will result in large benefit reductions across the board—makes adjusting the inflation mechanism less important. After 2033, the program will only be able to pay for 77% of all planned benefits because the trust fund, which is mostly funded by payroll taxes, would run out.

Employers and workers divide the payroll tax, which in 2023 amounted to 6.2 percent of earnings each, up to a $160,200 taxable maximum income. These taxes will be applied on earnings up to $168,600 in the next year. The only ways to fill the budget shortfall are to reduce benefits, increase these taxes, or have them cover higher incomes, all of which need agreement from Congress.

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