COLA refers to the Cost of Living Adjustment. This is something the Social Security Administration (SSA) uses to update retirement benefits in the United States annually.
As prices go up for food, services, loans, and other things like medical expenses, the Administration needs to increase benefits once a year. Thus, as inflation goes up, retirement benefits get a boost too.
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However, if there is no inflation, retirement benefits could remain the same. Social Security uses inflation during the third term and compares it with the same term in the previous year.
HOW MUCH HAS COLA INCREASED RETIREMENT BENEFITS IN MARCH 2024?
The latest Social Security COLA increased benefits by 3.2%, down from 8.7% in 2023. Therefore, the March payments include this 3.2% boost that they Administration announced on October 12, 2024.
Thanks to the 2024 COLA boost all benefits in 2024 will have this additional money. As a matter of fact, Social Security benefits have gone up by 50 dollars on average.
However, retirement benefits have increased by 59 dollars on average. If you are on Supplemental Security Income, your benefits have increased by up to 29 dollars only.
WHAT ARE THE DISADVANTAGES OF GETTING A COLA INCREASE?
If you are on retirement benefits and you have no other sources of income, you may not need to worry. Nevertheless, if you have other sources of income, you may need to file a tax return in 2024.
Receiving more money for your Social Security benefits can trigger a benefit reduction. The IRS will tax your benefits if you exceed the threshold they have set for 2024.
Many people had never paid taxes on their retirement benefits until the large COLA boost in 2022. Hence, receiving more money will be beneficial for most retirees, but others will have to pay more taxes to the IRS.