Each year, millions of Americans depend on Social Security and Supplemental Security Income (SSI) to maintain their standard of living. The annual Cost of Living Adjustment (COLA) plays a crucial role in preserving the purchasing power of these benefits. In 2024, a 3.2 percent COLA is set to go into effect, ensuring that beneficiaries receive an increase in their income. This blog explores the significance of the COLA, its history, and what to expect in 2024.
The Cost of Living Adjustment, or COLA, is a mechanism designed to protect Social Security and SSI beneficiaries from the erosion of their benefits due to inflation. It’s based on the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of the last year a COLA was determined to the third quarter of the current year. Put simply, if there is no increase in the CPI-W, there can be no COLA.
The CPI-W is determined by the Bureau of Labor Statistics, and by law, it’s the official measure used by the Social Security Administration to calculate COLAs. This formula ensures that as the cost of living rises, so do Social Security and SSI benefits, helping recipients keep up with their expenses.
The COLA mechanism was not always in place. Before 1975, Social Security benefits were only increased when Congress enacted special legislation. However, in 1972, Congress made a significant change by enacting the COLA provision as part of the Social Security Amendments. This led to the automatic annual COLAs we have today, beginning in 1975.
This was a pivotal moment in the history of Social Security, as it meant that inflation would no longer drain value from beneficiaries’ benefits. Since then, these automatic annual adjustments have been a lifeline for many Americans.
In 2024, the COLA is set at 3.2 percent. This means that Social Security beneficiaries will see their increased payments starting in January 2024, while SSI recipients will receive their higher benefits from December 29, 2023. For those who receive both Social Security and SSI benefits, this COLA will impact their total income.
The COLA is a testament to the government’s commitment to ensuring that Americans receiving Social Security and SSI benefits are shielded from the negative effects of inflation. This annual increase reflects the changing costs of living and guarantees that beneficiaries can keep pace with the rising expenses they face.
The annual Cost of Living Adjustment is a lifeline for millions of Americans, ensuring that their Social Security and SSI benefits keep up with the rising cost of living. In 2024, with a 3.2 percent COLA, recipients can breathe a little easier, knowing that their income will increase to match the challenges of the coming year.
It’s important to stay informed about these changes and understand how they might impact your financial situation. So, if you or a loved one are beneficiaries of Social Security or SSI, make sure to look out for your COLA notice and stay updated on the latest information from the Social Security Administration.
The COLA is a vital tool in securing financial stability for many individuals and families, helping to ensure a better tomorrow in an ever-changing world.