Most of the time, you would expect just seniors to be concerned about the reforms that Social Security is implementing. However, other concerns can affect your Social Security checks. The essence of the question is which of the policies will continue long enough to affect you when you retire.
One of the things you may have heard about recently is the COLA (cost-of-living adjustment), which essentially boosts the amount of Social Security checks and other retirement benefits. This is the most well-known adjustment, although it is also applied to other sums handled by the Social Security Administration (SSA), which is in charge of monitoring the several programs known as «Social Security.»
Why does Social Security adjust their Social Security checks?
Consider this: at the start of each year, you will see price adjustments for the majority, if not all, of the items and services you use daily. Situations like this may often cause you to consider how you will afford to live if you do not earn more or how you can change your present pay to make the impact of the price increase more acceptable. As a workforce member, you have some leeway to look for alternatives, such as negotiating a raise with your boss, moving employment, or taking on a second job to make ends meet. This same issue will affect SSA beneficiaries in a completely different way because they do not have the same freedom to adjust to inflation, and their options for supplementing their income are limited.
Given this, adjusting Social Security checks is an issue that must be addressed on a regular basis, and it has been determined since 1975 through the COLA adjustment. The methodology consists of selecting values for the CPI-W (Consumer Price Index for Urban Wage Earners and Clerical Workers), which aggregates the consumer preferences of families whose main breadwinner has a wage-paying or clerical job, and then averaging this index for the third quarter (July, August, and September) of each year to compare it to the previous one.
Why is this year’s adjustment of your Social Security checks not so bad?
Suppose you are one of those who are kept up to date on changes in the SSA or the various forecasts that occur throughout the year for the future of this system and the size of Social Security checks. In that case, you may believe that the defined 2.5% increase for the next year is small when compared to other values, such as 3.2% in 2024 or even 8.7% in 2023. However, to reach a more informed conclusion, it is important to remember that the COLA adjustment also represents how much inflation has affected the economy.
Thus, a lower number indicates less impact for senior citizens and, thus, a sustained purchasing power that would not necessitate a restriction in their consuming habits as would have occurred with larger adjustments. At the end of the day, the COLA is a statistic that serves as a proxy for inflation and is measured for a very short period, creating a delay between what the economy is experiencing and what may be done to mitigate the impact.
How big will this increase appear on your Social Security checks?
The 2.5% COLA for the coming year will appear not just on your Social Security checks but also on other limits the SSA has established for the program’s day-to-day operations.