Social Security beneficiaries will receive a 3.2% increase in their benefits in 2024. This adjustment is calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers (C.P.I.-W), which measures the average inflation from the previous year’s July, August, and September compared to the current year. The increase in prices results in a pay raise for beneficiaries.
There is ongoing debate about whether the C.P.I.-W is the most accurate measure for calculating Social Security adjustments, as it reflects the spending habits of working individuals rather than retirees. Some experts argue that the Consumer Price Index for the Elderly (C.P.I.-E), which tracks the spending of individuals aged 62 and older, would provide a more accurate representation of the costs faced by retirees.
Despite discussions about refining the inflation mechanism, there are concerns about Social Security’s impending financial shortfall. If unaddressed, this shortfall could lead to significant benefit cuts for recipients, as the trust fund that pays retiree benefits is projected to be depleted in 2033. This would result in the program only being able to fund 77 percent of total scheduled benefits.
To address the funding gap, options such as raising payroll taxes, expanding the earnings subject to taxes, and cutting benefits have been proposed. However, all of these measures require congressional approval and are subject to political considerations.
Alicia Munnell, director of the Center for Retirement Research at Boston College, emphasized the politically charged nature of decisions regarding Social Security revenue and benefit adjustments. She noted that the Social Security Administration provides numerous options for raising revenue and cutting benefits, but the implementation of these measures is ultimately a political decision.
