Cuts of up to 50% in Social Security benefits are coming: who will be most affected?
This comes on account of what is already a fact: the next Cost of Living Adjustment (COLA) will be much lower than what was approved for 2023 (8.7%). Thanks to the reduction in inflation, the COLA for 2024 is expected to be a maximum of 3%. This will obviously have a direct impact on the benefits received by retirees.
Inflation in 2023 has eased, although it still falls short of the expectation levels of the U.S. Federal Reserve (Fed), which expects it to be no more than 2% year-over-year. All Americans of different income levels have been affected, however, the lowest income earners and retirees living on Social Security have been hit the hardest. The bad news is that another blow is coming for seniors: cuts of up to 50% of their benefits.
This comes on account of what is already a fact: the next Cost of Living Adjustment (COLA) will be much lower than what was approved for 2023 (8.7%). Thanks to the reduction in inflation, the COLA for 2024 is expected to be a maximum of 3%. This will obviously have a direct impact on the benefits received by retirees.
According to recent research produced by Go Baking Rates, so-called boomers, whose generation was born between 1946 and 1964, could be the hardest hit with this move. “They stand to lose more than the older generation simply because they paid in more and also rely more (on that income) than other Social Security beneficiaries,” says Go Baking Rates.
This conclusion is drawn, in turn, from an analysis by the Senior Citizen’s League, which has predicted that next year’s COLA increase could be only 3.1%, less than half of the 8.7% approved for 2023.
The COLA is calculated based on inflation for the third quarter of the current year, which corresponds to the months of July, August and September and is released in early October. Inflation, which peaked in 2022 at over 9% year-over-year, has come down thanks to the U.S. Federal Reserve’s (Fed) strategy of raising interest rates at the federal level.
And while it’s good news that U.S. inflation is easing, a smaller COLA increase could make it tougher for thousands of retirees, especially those with debt.
“Between January 2000 and February 2023, Social Security benefits increased only 78%, averaging just 3.4% annually, while food, utilities and other goods and services increased 141.4%, averaging 6.2% annually, The Senior Citizens League reported, citing data from the U.S. Bureau of Labor Statistics,” Go Banking Rates reports.
Added to this is the fact that a lower COLA increase will not have a great impact on the budget of those who earn less, and in this scenario we can integrate those who earn salaries between $28,000 and $38,000 dollars, the so-called boomers generation.