How does Social Security’s COLA increase for 2024 affect the US economy?

How does Social Security’s COLA increase for 2024 affect the US economy?

Every month Social Security Administration (SSA) Sends more than 71 million payments to beneficiaries. The vast majority of them are sent to beneficiaries of the Old Age, Survivors, and Disability Insurance (OASDI) program, which It pumps about $114 billion into the US economy every month According to the latest agency data. Over the course of a year, that’s roughly $1.4 trillion or About 5% of the US GDP.

These funds help support those who have contributed to the program During their careers once they have retired or become disabled, as well as their survivors or certain family members who have become or have become disabled themselves. The program provides A valuable lifeline not only to themselves, but also to the local economies in which they live.

How does Social Security’s COLA increase for 2024 affect the US economy?

In order to ensure that benefits can keep pace with inflation The Social Security Administration (SSA) automatically increases benefits each year through a cost-of-living adjustment. It is more commonly referred to as an annual COLA. On October 12, the 2024 COLA increase was announced, by 3.2%, which is a modest increase compared to the past two years, But well above the average of 2.6 percent over the previous two decades.

But if Social Security benefits represent such a large portion of the American economy, Wouldn’t the COLA law help drive inflation? Not according to AARP legislative counsel and policy director David Sertner. Speaking to CNN’s Before the Bell he says so “This is a self-financing mechanism.” Due to the rise in wages and the rise in prices over the past two years. This means more payroll taxes paid into the system So he “corrects himself in this way.”

in addition to, Social Security payments generate a greater gross domestic product than the amount paid to beneficiaries each month. As the largest source of income for most retirees, it provided half of the income for 40 percent of retirees in 2015, and 90 percent for one in seven. The money is returned directly to the economy. The retirement benefits from the program for Americans are also modest Much lower than those in many other developed countries.

In addition to, While the COLA helps beneficiaries keep up with inflation, they never get ahead. Quite the opposite, according to research conducted by the Senior Citizens’ League (SCL). The nonprofit advocate for seniors found just that Social Security benefits have lost approximately 36% of purchasing power since 2000.

One of the major expenses for seniors is medical costs, which tend to rise faster than general inflation. SCL was pleased that next year’s Medicare Part B increase would not be as high as expected. Still, Premiums and deductibles will rise about 6 percent, nearly double the 2024 COLA.

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