This week the U.S. Bureau of Labor Statistics reported the Consumer Price Index for September 2023. The September 2023 number dictates the Social Security Cost of Living Adjustment (COLA) for 2024. Based on last week’s data, the Social Security COLA will be 3.2% for 2024.
This is just another reminder of one of the fabulous benefits of Social Security. The COLA helps your income benefit keep pace with inflation. Since most people will live 10 to 15 years longer than they think, having a benefit that will rise with the cost of living is HUGE.
Here are a couple of good things about Social Security to remember:
DON’T CLAIM TOO SOON. most people will receive MORE benefits in their lifetime if they wait to start claiming income benefits until benefits max out at age 70. If you live to age 81, you will likely receive more benefits by waiting to start at 70 rather than starting at age 62 or age 67. And, currently, Social Security estimates that a male born in January of 1963 can expect to live to 83 on average.
DON’T CLAIM IF YOU PLAN TO KEEP WORKING. If you plan to continue earning taxable income after age 62, it’s best to delay claiming Social Security. If you claim Social Security and have earned income higher than $22,320 per year, you will have a reduced Social Security benefit for life and you will have added hassle along the way.
YOUR BENEFIT IS INCREASED BY THE COLA, EVEN IF YOU AREN’T CLAIMING. Some people incorrectly think that they need to be receiving benefits to have the benefits increased by the COLA. In fact, the COLA is factored into your benefits as you are working. And, you are adding credits every year you work as well.
YOUR BENEFITS WON’T BE CUT IN 2034. Most people have heard something about how Social Security will have to cut benefits by 20% in 2034. This is most likely not going to happen. Since people who would be most affected by any reduction are aged 60+ AND since those same people are likely to vote AND are likely to lobby their representatives, Congress is NOT likely to pick a fight with those voters.
It IS LIKELY that something similar to the changes made under Ronald Reagan in 1983 will be used to resolve the pending shortfall. You may recall that in 1983 a law passed to raise the Full Retirement Age gradually from age 65 to age 67 by the year 2022. So, expect to see the Full Retirement Age pushed back for younger workers.
Another option that COULD help is to raise the ceiling on wages taxed for Social Security. In 2023 only the first $160,200 of taxable income is subject to Social Security tax. If this number was raised, or if the cap was removed it would go a long way toward filling the Social Security Gap.
For more detail check out the SSA COLA Fact Sheet.
If you would like some analysis of what you can expect to receive from Social Security, and how you could maximize your benefits, I’m happy to help with that. I talk with all my clients about how to best use their Social Security benefits.
Maybe you would benefit from a visit with an experienced, highly-trained, CERTIFIED FINANCIAL PLANNER™ professional and Behavioral Financial Advisor. I love to help families better understand their options. I love to meet new people. So, follow this LINK to find a time for us to have a get-acquainted visit.
I am a financial planner who is an advocate for my clients ALL THE TIME – a fiduciary financial planner. I provide guidance based on clients’ best interests, not commissions or sales quotas. I think it’s the best way to serve clients and I am thrilled to work this way all the time.
And yes, I’m still taking on a few great families to be part of my financial planning practice.
Dunncreek Advisors does not provide legal or tax advice, nor is this article intended to do so.