Millennial Money: What the 2024 Social Security COLA could mean for your retirement

abcnews.go.com:

The Social Security Administration adjusts its benefits payments each year to reflect changes in the cost of living

Social Security benefits for millions of people will rise by an average of over $50 a month starting in January, thanks to the Social Security Administration’s 3.2% annual cost of living adjustment for 2024, announced on Oct. 12. The change will immediately put more money in current retirees’ pockets, but it also could have a considerable effect on payouts to future retirees.

The 2024 increase is much smaller than last year’s 8.7%,the largest since 1981. But because the COLA reflects inflation, a smaller increase is not necessarily a bad thing; it suggests that inflation is more stable and may help the Social Security Administration provide maximum benefits for longer.

The COLA has been relatively volatile in recent years, however, and future retirees are understandably concerned about the health of the Social Security benefits program.

Here’s what the cost of living adjustments really mean and how to factor Social Security benefits into your future retirement budget.

A LOWER COLA IS A GOOD SIGN

Though it’s reasonable to assume that a lower cost of living adjustment is worse for Social Security recipients, it may also point to a healthier economy. The SSA increases the COLA in response to inflation, which means that a hefty COLA jump — like last year’s 8.7% — reflects a serious bump in the costs of goods and services.

“The (Federal Reserve’s) goal is for inflation to be 2% or lower, and therefore, the COLA increases by Social Security would be 2% or lower,” says Randall Holcombe, a certified financial planner and director of wealth planning at Confluence Financial Partners in Pittsburgh. “If your costs