Social Security Cost of Living (COLA) Is Likely to Increase in 2024

November 6, 2023

Following two years when Social Security Cost of Living Adjustments (COLAs) soared to the highest levels in decades, beneficiaries should not be surprised by more modest increases in monthly payments in 2024, reports a recent article, “Social Security COLA 2024: How Much Will benefits Increase Next Year?” from AARP.

The inflation gauge used by the Social Security Administration (SSA) to set the annual COLA rose at a 2.6% annual rate for July and 3.4% for August. These are the first two of three months the SSA uses to determine the final increase, which will be announced more formally in October.

The August uptick was a bit higher than anticipated, and September’s inflation numbers are expected to rise to similar levels. Analysts expect a 2024 COLA of about 3 percent.

This may seem like a letdown for recipients. Still, COLA is calculated to exactly offset the price increases faced by consumers, measured by the Consumer Price Index, since the prior COLA was determined.

A 3 percent COLA indicates inflation is slowing down or getting under control, which is especially important for seniors living on a fixed income. While a higher COLA sounds nice, it reflects rising prices, which can be far more challenging for retirees who count on Social Security benefits to pay their household bills.

All forms of benefits are affected by the COLA, including retirement, disability, family, and survivor benefits. The adjustment starts with the December Social Security benefits, which most folks receive in January 2024.

Benefits are calculated by the CPI-W, a subset of the main Consumer Price Index, which measures a broad range of retail prices. The SSA compares the average CPI-W for July, August, and September of each year to the figure for the same period the year before to arrive at the COLA for the year to come.

For example, the year-over-year changes in the CPI-W for the three months in 2022 were 9.1%, 8.7%, and 8.5%, respectively. Over the entire quarter, the index was 8.7% higher than average for the same period in 2021, resulting in the COLA used at the start of 2023.

If projections hold, and there’s no reason to think they won’t, the 2024 adjustment will align more with the relatively low inflation pre-pandemic period. When there’s no inflation, there’s no COLA. This happened in 2010, 2011 and 2016. The most significant adjustment ever? 14.3 percent in 1980.

Studies by the Center for Retirement Research show Social Security benefits generally keep up with inflation in the long term but can lag during short-term periods of volatility, depending on whether or not the price index is trending up or down when the COLA is set.

Beneficiaries in 2021 and 2022 lost buying power when COLAs were outpaced by surging inflation, peaking around 9 percent in mid-2022. This year, inflation was cooling somewhat when the 8.7 increase took effect and remained below the COLA level.

Another factor impacting the COLA’s value is Medicare costs. A rise in Medicare Part B premiums in 2024 would offset a portion of the COLA increase for Social Security recipients who have premiums deducted directly from their benefits, which is about 70 percent of Medicare enrollees.

Reference: AARP (Sep. 13, 2023) “Social Security COLA 2024: How Much Will benefits Increase Next Year?”

More Vets are Enrolling in VA Medical Services

March 22, 2023

The Department of Veterans Affairs experienced a surge in patients signing up for department health care services after the passage of sweeping military toxic exposure legislation last summer. Nonetheless, the VA is confident they have hiring plans in place to absorb the extra work.

Military Times’ recent article entitled “Enrollments in VA medical care spiked after PACT Act passage last year” reports that this is an increase of more than 17% from the same five-month period a year earlier. Elnahal said officials don’t yet have data specifically linking the increase to the signing of the Promise to Address Comprehensive Toxics Act (better known as the PACT Act) last summer. However, officials believe the two issues are connected.

“We are also doing everything we can to make our resources and personnel systems as efficient as possible, so that our clinics can absorb that demand as it really starts to come in,” he said.

“And we do still have targets for this year to reduce wait times, which really means that our priority around staffing up is first and foremost.”

In addition to expanded disability benefits for those suffering from illnesses linked to burn pit smoke and other toxins from military service, the PACT Act mandated 10 years of VA health care coverage for troops when they separate from the military. This extension affected about 800,000 vets. The VA also has made a public push in recent months to encourage more veterans to sign up for department health care to ensure their military-specific conditions are being tracked and treated.

The PACT Act and the fiscal 2023 budget approved by Congress included both funding and flexibility for increased staffing at VA medical centers to address the possible increase in enrollment. VA officials have a goal of about 52,000 new hires this fiscal year to replace departing staffers and add personnel to high-demand areas.

The move builds on efforts to publicize health care and disability payouts available through the PACT Act. Through the first four months of the fiscal year, VA has already hit about half of its hiring goal, he said.

“We need to hire more providers, more clinicians and schedulers, folks from top to bottom in this organization,” he said. “And as we do that, we’re making sure we’re holding ourselves to efficiency and productivity standards that our veterans deserve.”

Reference: Military Times (Jan. 26, 2022) “Enrollments in VA medical care spiked after PACT Act passage last year”

Can I Collect Social Security from an Ex-Spouse?

July 1, 2021

The divorce rate among Americans 50 and older has roughly doubled since the 1990s, and nearly tripled for those over 65. Kiplinger’s recent article entitled “Yes, You Can Collect Social Security from an Ex-Spouse: Here’s How” explains that you can collect on your ex-spouse’s record if:

You’re at least 62 and single
You were married to your ex-spouse for at least 10 years
The benefit you are entitled to receive based on your own work history is less than the benefit you’d get based on your former spouse’s work history; and
Your ex-spouse qualifies for Social Security.

You can even begin drawing benefits before your ex-spouse has retired, provided he or she qualifies, and you’ve been divorced at least two years. You can receive up to 50% of the amount your former spouse would receive in benefits at their full retirement age (this is for all spouses, not just exes). This is not in addition to your own benefit. Your benefit has to be lower than half of your ex’s benefit for you to apply.

Many divorced spouses are eligible for the same survivor benefits as current spouses. This means you could get the full amount of your ex’s benefits, not just half. Your marriage has to have lasted at least 10 years, and the amount has to be greater than what you’d receive based on your own record. There’s also another big difference: you can start getting survivor benefits at age 60, or 50 if you’re disabled.

The Social Security Administration (SSA) says that if you are divorced, when applying for benefits on your ex’s record, you will be asked questions about your name and work history. You may need to provide:

A birth certificate or other proof of birth.
Proof of U.S. citizenship or lawful alien status, if you were not born in the United States.
S. military discharge paper(s), if you had military service before 1968.
W-2 forms(s) and/or self-employment tax returns for last year.
Your marriage certificate.
Your final divorce decree.

Speak with an experienced elder law attorney before deciding how and when to take Social Security.

Reference: Kiplinger (May 13, 2021) “Yes, You Can Collect Social Security from an Ex-Spouse: Here’s How”

What are the Biggest Mistakes Women make with Social Security?

January 11, 2021

Retirement planning is an important part of long-term financial wellness, and for women, who typically make less money and live longer than men, it can mean lower Social Security benefit payments and other problems.

Money Talk News’s article from January entitled “3 Costly Social Security Mistakes That Women Make” looks at some of the costliest Social Security mistakes that women can make.

Taking your Social Security benefits too early. Deciding to take Social Security benefits too soon can be especially costly for single women and women in same-sex relationships or marriages. Women usually have a tougher time than men saving for retirement because they have lower lifetime earnings and a longer lifespan than men, on average. For single women, these challenges are compounded by the absence of a significant other bringing in additional Social Security income — or any other type of retirement income. It may be prudent for single women and women in same-sex relationships to delay claiming Social Security benefits as long as possible, so the amount of their monthly benefit is higher when they do start getting it.
Forgetting about your ex-spouse. If you were married and then divorced, and your marriage lasted at least 10 years, you might be eligible for benefits through your ex-spouse. You should check to see if you’d get a better monthly payment by claiming through an ex’s earnings record, instead of your own. If you’re currently unmarried and at least 62, and your ex-spouse is at least 62, you can claim spousal benefits. Your own retirement benefits at full retirement age must be less than half of your ex’s benefits. (When you claim ex-spousal benefits, it will trigger a claim for your own benefits, unless you were born before 1954.) Even if your ex hasn’t applied for benefits yet, you can file a claim on his or her account, provided you and the ex are both at least 62. However, remarriage will mean the loss of ex-spousal benefits. However, if your later marriage also ends, you again become eligible for the ex-spousal benefits.
Allowing your spouse to make a unilateral claiming decision. A 2018 study from the Center for Retirement Research found that a husband can increase his wife’s survivor benefits by 7.3% each year by waiting to claim his benefits. However, the study says that many husbands don’t think about the effect that their age at claiming benefits can have on their survivor and her benefits. Rather, many husbands will look at more immediate issues and decide to claim Social Security earlier. Despite being educated about the possible effect on their wives in the future, many husbands said they wouldn’t change their claiming age.

Talk to your spouse about how to best manage when each of you should file a claim for benefits and coordinate your retirement and your Social Security claims.

Reference: Money Talk News (Jan. 6, 2020) “3 Costly Social Security Mistakes That Women Make”

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