After many months of speculation, there's finally an answer on the Social Security COLA (cost-of-living adjustment) front. In 2024, Social Security benefits will rise 3.2%. Estimates had floated around in the 3% to 3.5% range, so the official COLA shouldn't really come as a shock to anyone who's been following that news.
Of course, many seniors are apt to be disappointed with a 3.2% COLA given that 2023's raise was so generous. Earlier this year, Social Security benefits got an 8.7% boost -- the largest raise to arrive in decades. So by comparison, 3.2% seems negligible.
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But while you may have been hoping for a larger raise in 2024, the reality is that a 3.2% COLA isn't so bad. Here's why.
It's larger than a number of recent COLAs
It's easy to write off 2024's Social Security COLA as tiny compared with the past couple of years. Not only did seniors on Social Security get an 8.7% COLA in 2023, but the year before, their benefits rose 5.9%.
But it's important to realize that 3.2% isn't so small in the grand scheme of recent COLAs. Since 2020, seniors on Social Security have gotten three COLAs amounting to 0% and seven COLAs of under 2%. So in that context, 3.2% doesn't seem so bad.
It's an indication that inflation is cooling
Another reason not to get too upset over a 3.2% Social Security COLA? It's a sign that inflation is reaching a more moderate level.
Social Security COLAs are directly tied to inflation, so a smaller one is an indication that living costs may be getting more manageable. The whole reason Social Security recipients got such a generous COLA at the start of 2023 was that inflation reached record-setting levels in 2022.
Coping with a smaller COLA
You may have been holding out hope for a larger COLA in 2024, and coping with a smaller one may require you to make some adjustments to your spending. So take a look at your expenses and see if there are non-essentials you can cut back on without negatively impacting your quality of life. And if that's not possible, it may be time to turn to the gig economy.
Part-time work in retirement isn't what it used to be. These days, you can generate extra income by doing work that's creative, engaging, and minimally intrusive to your schedule. So if you feel you'll need an income boost in light of next year's Social Security COLA, don't hesitate to explore different gig opportunities and see which ones are the most lucrative.
Another option to consider? Relocating to a less expensive part of the U.S.
Social Security benefits and COLAs aren't adjusted for local living costs. You can collect the same monthly benefit if you live in an expensive city or a low-cost rural area. So if you're worried about making ends meet in the coming year, start doing your research to see where your benefits might end up going the furthest. Though uprooting your life isn't an easy thing, the ability to reduce your financial stress could make it worthwhile.
