3.2% Social Security COLA for 2024 may leave some retirees short

investmentnews.com:

The Social Security cost-of-living adjustment will be 3.2% in 2024, down from the massive boost of 8.75% implemented this year.

The increase, which the Social Security Administration announced Thursday morning, is higher than the average of 2.6% seen over the past 20 years. But the decline in the COLA from 2023’s is a sign of cooling inflation.

The rise amounts to an average increase of $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.

“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,” said Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League. “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.”

Social Security taxes are also affected by the change, with the maximum earnings that are taxable going from the current level of $160,200 to $168,600. That affects self-employed workers more, as they have to pay both the employee and employer portion of the tax, totaling 12.4%, Johnson noted.

“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,” Larry Luxenberg, principal of Lexington Avenue Capital Management, said in an email. “This increase is only slightly above the Social Security Administration’s long-term projection. Prior increases for the last few years were unsustainable.”

The