COLA 2024: The Cost-of-Living Adjustment (COLA) is an annual adjustment in Social Security benefits tied to inflation rates. For 2024, this figure is projected to reach 6.1%, the highest since 1982 – meaning monthly benefits for retired workers will go from an average monthly benefit of $1,507 to an expected maximum benefit of $1,599. So what will this mean for your income and savings? Here are a few key considerations:
The Pros of COLA 2024
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- This will assist millions of seniors and disabled people in keeping up with rising prices for goods and services such as food, energy, and health care – improving both purchasing power and quality of life.
- This will also have a substantial positive effect on the economy by stimulating consumer spending and demand. According to research by AARP, each dollar of Social Security benefits generates approximately $2 in economic output – this means that an increase of up to 10% could add over $50 billion dollars in gross domestic product (GDP).
- This will also help other groups who receive benefits tied to Social Security, including veterans, federal retirees and Supplemental Security Income (SSI) recipients – these benefits will increase by 6.1% during 2024.
The Cons of COLA 2024
- COLA 2024 Unfortunately, the COLA 2024 will have some detrimental repercussions for your income and savings. In particular, Social Security beneficiaries will face higher tax bills as more of their benefits will become subject to federal income tax – this reduces net income and disposable income significantly.
- The COLA 2024 will also raise Medicare Part B premiums, deducted from Social Security benefits. Medicare Part B covers outpatient services like doctor visits, lab tests and medical equipment; its premium for 2024 has yet to be announced but is projected to increase from $148.50 per month to $158.550; this will reduce net increases in Social Security benefits by approximately 11%.
- COLA 2024 will also erode your savings, as inflation decreases the purchasing power of your money. According to the Bureau of Labor Statistics, inflation rose 5.4% between September 2020 and September 2021 – meaning one dollar would buy less in 2021 than it did back then; should inflation persist at such a rapid rate then your savings will dwindle even more rapidly over time.
The Bottom Line
The COLA 2024 can be seen as both an opportunity and threat for your income and savings. On one hand, it will increase Social Security benefits to help offset inflation; yet on the other hand it may increase taxes, Medicare premiums and inflation. Therefore, when planning your budget it is essential that you find ways to save more while spending less and diversify income sources to protect savings against inflation – the COLA 2024 should not be seen as an easy win Remember it will not bring free money.
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