No relief for seniors as big drop forecasted for Social Security COLA
Seniors will see a big drop in Social Security COLA adjustment next year. (iStock)
Saturday, Apr 27, 2024
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Seniors will see a big drop in Social Security COLA adjustment next year. (iStock)
Seniors drawing Social Security benefits could see them increase by as much as 2.5%, trailing moderating inflation figures, according to one early estimate.
The Congressional Budget Office’s (CBO) estimate of 2.5% comes just above the 1.75% cost of living adjustment (COLA) that the Senior Citizens League (TSCL) is forecasting for 2025. TSCL’s COLA estimates fluctuate based on the most recent CPI data.
Beneficiaries saw an extra $59 monthly starting this January based on the 3.4% COLA for 2024. The adjustment is lower than in previous years because of moderating inflation. Recipients received increases of 8.7% for 2023 and 5.9% for 2022, which were the largest since the early 1980s because of record-high inflation.
“This is the forecast based on data through January 2024 that was released today, and the final COLA for 2025 is likely to be different from the estimates because the COLA is calculated on the average rate of inflation during the third quarter, which is compared against the third quarter a year ago,” TSCL stated. “In other words, there are another eight months of data to come in, and a lot could change.”
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The tapered cost-of-living bump that is forecasted for 2025 is likely to fall short of what seniors calculate they need to make ends meet. Seniors have already said that the more generous 2024 COLA won’t be enough to cover the rise in their household spending, according to TSCL’s 2024 Senior Survey.
Nearly three in five seniors collecting Social Security are struggling financially and 62% said the 3.2% cost of living adjustment (COLA) for 2024 is insufficient to cover their expenses and support their lifestyle, the Atticus survey said. Roughly 40% said they planned to find work due to the modest COLA increase, with almost half of single seniors (47%) considering employment to supplement their income.
“The 2024 COLA increase has illuminated significant financial stress among seniors collecting Social Security, highlighting the widening gap between Social Security benefits and the rising cost of living,” Atticus said in its report. “These statistics and personal accounts point to a pressing need for more robust measures to support the elderly, especially those who are single or contemplating rejoining the workforce.
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More Social Security recipients may owe taxes on their benefits for the first time this tax season, according to TSCL. Twenty-three percent of survey participants who received Social Security for three years or more said they paid tax for the first time during the 2023 tax season. This percentage will likely increase this tax season because of the 8.7% COLA increase in 2023.
Social Security benefits are taxed when incomes surpass $25,000. This fixed threshold has never been adjusted for inflation since the tax became effective in 1984. Up to 85% of Social Security benefits can be taxable when income exceeds certain thresholds.
“We expect the higher Social Security income will not only cause more Social Security recipients to pay taxes on their benefits this tax season, but taxes are taking a bigger portion of Social Security checks in 2024,” Mary Johnson, a Social Security and Medicare policy analyst for The Senior Citizens League said.
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