The COLA takes effect every year in the pocketbook of United States citizens with some type of benefit. Whether it is SNAP, Social Security retirement or disability check or a Supplemental Security Income benefit. Almost any payment that can be issued by the United States Government will have the COLA added to it.
But this won’t be until the first of the 2024 calendar payments. Before that day no citizen can enjoy the COLA increase, as this system is set up to combat inflation each year. However, many Americans are unaware that this increase could cause citizens to lose some of their money.
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While it is true that for most Americans the COLA increase is very good news, for some it could be bad news. It all depends on the income limit for Social Security beneficiaries and taxes. Remember that even if we collect the retirement payment we could also pay taxes.
So if we are not careful we could lose money from Social Security through the COLA. It is important to check everything before you file your next tax return. Not doing this can be a huge mistake forcing us to pay money in penalties and fines because of taxes.
CHANGES TO THE COLA FOR AMERICANS
Americans who have a Social Security benefit will get an increase starting next year 2024 through the COLA. This increase will be 3.2% in total. While it may seem insufficient, at least citizens will be able to combat inflation in some way.
Among these changes we find that the maximum retirement payments will change. Depending on the type of benefit we have, our payment could reach a new maximum. These will be the new maximum Social Security payments after applying the COLA:
- Maximum payment for retirees age 70: $4,700 per month.
- Maximum payment for citizens with a Disability benefit: $3,743.
- Maximum payment for citizens with average Social Security: $1,948.
As can be seen, the new maximum payment overall is $4,700 per month. This means that the increase is almost $150. But not all citizens can enjoy such a large check increase. Each of the payments increases on a percentage basis.
The problem with all of this comes when we realize that some Americans might exceed a monthly income threshold that they did not exceed before. For that reason, for some Americans this increase may be a negative thing.
Exceeding the maximum limit of money before paying taxes will cause some Americans to have to pay taxes. Therefore, we are faced with a contradictory situation, and that is that the COLA increase will cause some Americans to lose money in the form of taxes.
IS A 3.2% COST OF LIVING ADJUSTMENT BY 2024 ENOUGH?
One of the big questions of the last few weeks is whether the 3.2% COLA for 2024 will be enough. And the truth is that as of today it is impossible to determine an exact answer. Until 2024 arrives and we see whether inflation has continued to increase or not we won’t be able to know if it will be enough or not.
While it is true that prices in general have stagnated, nothing can assure that by 2024 we will have stable prices as they are now. So it is possible that we will find ourselves with an insufficient COLA but it is also possible that we will find ourselves with something totally insufficient.
It will all depend on how prices evolve and how much extra money people will need for next year. Still, there are extra benefits like Supplemental Security Income that Social Security recipients can apply for, which makes them a little more money for next year.