As Social Security races toward insolvency, retirees are getting their biggest COLA boost in 4 years

The Social Security Administration is set to increase benefits by 3.6% in January 2024, the largest raise in four years. This cost-of-living adjustment (COLA) increase will be distributed to about 72 million recipients, adding an average of $75 to their monthly checks. The increase is driven by higher inflation and is projected to exhaust the Social Security trust fund by late 2032.

This COLA is 0.9 percentage points higher than the 2.8% increase in 2023 and surpasses the 3.4% forecast by some analysts in August. The COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, indicating that prices are rising faster than previously expected. The raise will have a more significant impact on higher-income retirees, with the wealthiest couples potentially receiving a combined $3,600 per year increase.

However, the retirement and disability funds may only be able to pay full benefits until the fourth quarter of 2032, after which they would cover only 78% of scheduled benefits. Experts suggest possible reforms, such as adopting the chained CPI, setting a COLA cap, or implementing a six-figure benefit limit to address potential future cuts.