Consumers in the United States struggled greatly in 2022, as inflation soared from the start of the year to the end. Many people ended the year in debt because that’s what it took to pay their bills.
The Consumer Price Index (CPI) showed a 9.1% annual increase in inflation in June of last year having a huge impact on people’s cost of living adjustments. (Photo: AARP)
While inflation remains much higher than average, it gradually but steadily decreases. The Consumer Price Index (CPI) showed a 9.1% annual increase in inflation in June of last year having a huge impact on people’s cost of living adjustments. The CPI most recently increased by 6% year on year in February. That is a significant decrease.
While falling inflation is good news for consumers, especially for budget-conscious retirees, it may cause problems for Social Security recipients. If the inflation rate continues to fall, it will have a massive impact on people’s cost of living adjustments which to many is an understatement.
A mixed bag
People are desperate for inflation relief, and this includes seniors who rely on Social Security for the majority, if not all, of their retirement income. In that regard, inflation and living costs are falling in many key consumer categories is a good thing. However, if inflation continues to fall, the Social Security COLA in 2024 may be minimal, if not non-existent.
The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), a subset of the CPI, calculates Social Security COLAs. Seniors on Social Security received an 8.7% COLA in January of this year, the largest in decades. However, the CPI-W rose 5.8% year on year in February. Seniors may have to say goodbye to a 2024 COLA if this trend continues.
Take advantage of increased benefits today
If inflation remains low, Social Security recipients’ monthly benefits will not be reduced in 2024. No such thing as a negative COLA exists. The worst-case scenario is that benefits are not increased at all.
However, because a $0 COLA is possible in 2024, seniors on Social Security should do everything possible to shore up their finances this year to lessen the impact on people’s cost of living adjustments. Unfortunately, because living costs are still high, many people will need more wiggle room in their budgets. Those who can save some of that money for a rainy day may be grateful if a COLA does not come through for the new year.
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