Will the 2024 Social Security COLA Be Enough?

Will the 2024 Social Security COLA Be Enough?

With rampant inflation continuing to affect nearly every sector of the economy, those in and near retirement are concerned about whether their income will be enough to meet their expenses. Those who receive the majority of their income from Social Security are at the highest risk. Since the beginning of the COVID-19 pandemic, they have been forced to stretch every dollar they take in just to ensure they can have a comfortable life in retirement. These people are barely able to afford their day-to-day expenses, let alone take advantage of the nest egg they worked their entire lives to build. 

The Social Security Administration (SSA) provided some relief in the form of Cost-of-Living Adjustments, or COLAs, which are determined annually based on the consumer price index. These annual increases in Social Security benefits are intended to help retirees beat inflation so they can afford food, gas, electricity, and other essential goods and services that allow them to enjoy retirement. 2024’s COLA of 3.2% was calculated based on an estimated 3.1% rate of inflation from 2022 to 2023, but when inflation rose 0.3% more than expected in December, this adjustment turned out to be less than sufficient. In addition, because COLAs are calculated based on a year-to-year inflation figure, they often fail to account for price increases that occur over multiple years.

When you consider that prices for groceries and a range of other goods and services are significantly higher than they were before the pandemic, it is easy to see that Social Security COLAs have not kept pace with actual price increases from 2019 to 2023 and that the 2024 COLA will not be enough to allow retirees to reclaim their lost buying power. Read on for Crash Proof Retirement’s analysis of price increases from 2019 to 2023 and their impact on retirees, plus some tips on what you can do to beat inflation in retirement.

How Are COLAs Determined?

The SSA uses consumer price index data from the third quarter of the previous year to the third quarter of the current year to determine the COLA for the following year. In years where there was no inflation increase, there was no COLA. In the case of 2024, that COLA was determined based on the percentage increase of CPI data from July-August of 2022 – when inflation rates were at some of their highest levels since the 1980s – to the same period in 2023 when inflation rates were comparatively calm. Because COLAs are determined in this manner, they don’t fully account for real consumer price increases, especially those that occur over multiple years and can prove to be inadequate in fulfilling their intended purpose.

For example, take the price of groceries from 2019 to 2023. According to data from the Bureau of Labor Statistics (BLS), a bag of groceries including essentials like eggs, milk, chicken, and ground beef cost $15.28 in November 2019, while the same bag of groceries cost $20.61 in November 2022 and $19.53 in November 2023. Using this data you can see that although grocery prices fell from 2022 to 2023, they are still 27% higher than they were in 2019. Social Security COLAs from 2019 to 2023 totaled just 20.7%. Data from various sources show that other essential expenses also increased sharply over that period. An average gallon of gas went from $2.63 to $3.99, a nearly 52% increase. The average price of a new car rose 27% while the average mortgage payment went up by almost 18%. At best, Social Security COLAs have barely covered inflationary increases; at worst they have proven to be woefully inadequate.

How You Can Prepare Your Retirement for Inflation

Household expenses have risen a great deal since 2019, and Social Security COLAs have not been enough to fully cover those increases. Luckily, when you plan for retirement using the Crash Proof Retirement System, you can create your COLA to meet your additional expenses every year. Each Crash Proof Retirement System is personalized to your needs and comes with built-in inflation fighters that allow you to increase your income by up to 35% annually with no fees or penalties and without depleting your nest egg. If you don’t need to activate your inflation fighters, your System will continue to grow tax-deferred so you will always have income to cover your expenses, should you need to.

When you crashproof your retirement, you won’t have to depend on the SSA to grant you additional income each year! Not only that, but the financial vehicles used in the Crash Proof Retirement System are not based in the securities industry like stocks, bonds, and mutual funds. That means Crash Proof Vehicles are guaranteed to never lose a penny when the stock market drops or crashes. They also credit interest at rates similar to those securities-based vehicles, and once that interest is credited, it becomes part of your principal and cannot be lost. Protection of principal is one of the most important aspects of a Crash Proof Retirement because it ensures your nest egg will remain intact no matter what happens with the stock market, providing a guaranteed income stream you can count on to cover your expenses. In times of extreme inflation – like we are seeing today – having the flexibility to increase your income up to 35% allows you to maintain your standard of living regardless of economic conditions. 

To find out more about the Crash Proof Retirement System, get in touch with our team of licensed Retirement Educators right away. Call 1-800-722-9728 to schedule your free financial checkup and learn how you can protect your nest egg from market crashes, fees, and even inflation. You can have the high standard of living you desire in your golden years and Crash Proof Retirement can help you achieve it.