Social Security recipients could see a smaller benefits bump in 2024 - Here's what that means for retirees

The Social Security COLA reached a four-decade high in 2023

Many Americans say they can no longer depend on Social Security, an Allianz Life survey found (iStock)

The Social Security cost of living adjustment (COLA) for 2024 could rise to 3%, according to an estimate by The Senior Citizens League. That could increase the average monthly benefit of $1,787 by slightly more than $53.60, the League said.

Still, a 3% bump would be smaller than the 8.7% spike Social Security beneficiaries got in 2023. That marked the highest increase in four decades. 

The Senior Citizens League raised its 2024 estimate following the June report on The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which the Social Security Administration uses to determine the COLA to benefits. The CPI-W rose by 2.3% year-over-year in June, causing the Senior Citizens League to raise its estimate from its 2.7% prediction in May.

But most Americans say they can no longer depend on Social Security. In fact, 74% of Americans said they couldn't count on Social Security benefits to supplement retirement income, and 88% said it's imperative to have another source of guaranteed income to retire comfortably, according to a survey by the Allianz Life Insurance Company of North America.

In addition, 68% of Americans said they would like more information about annuities as part of their retirement plans, according to a separate Allianz survey

"Americans are eager to have their plan sponsors add a guaranteed lifetime income option such as an annuity as part of their employer-sponsored retirement plan," Matt Gray, Allianz Life head of employer markets, said in a statement. "In today’s economic environment, adding an annuity to a portfolio can help mitigate risks to a retirement strategy and improve outcomes."

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What’s an annuity? 

An annuity is generally designed to turn an investment into a predictable stream of lifetime retirement income, depending on the type. Annuities are contracts with insurance companies that require them to make payments either immediately or in the future. People can purchase annuities with a lump-sum investment or by making a series of payments overtime. 

"Annuities may be good for people that want the option of a lifetime income during their retirement and may have concerns about outliving their savings," the National Council on Aging (NCOA) said in a post.

The insurance company providing the contract for an annuity invests payments so accounts earn interest. According to the terms of the contract, payments are provided from earnings on the original investment, minus fees. Here are some common types of annuities.

Fixed annuity: These annuities offer a set amount of interest on contributions to the account, regardless of market conditions. Payment streams can be set for a specified timeframe or for a lifetime.

Variable annuities: As a contrast to fixed annuities, variable annuities offer payments that can vary depending on the performance of various investment options like mutual funds.

Indexed annuities: These annuities offer payments based on the performance of a broad market index such as the S&P 500. 

But as with any investment, annuities carry risk. 

"Make sure you consider the financial strength of the insurance company issuing the annuity," the Securities and Exchange Commission (SEC) said in a post. "You want to be sure the company will still be around, and financially sound, during your payout phase."

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More Americans could get access to SSI benefits

In addition to Social Security benefits, some retirees could qualify for Supplemental Security Income (SSI), which provides monthly payments to Americans with disabilities or blindness who have certain financial needs. People ages 65 and older without disabilities could also receive SSI benefits if they meet certain financial qualifications.

The Senior Citizens League has launched a new campaign aiming to help more Americans receive SSI benefits.

This campaign focuses on people in communities that experienced the sharpest SSI application decline since the COVID-19 pandemic began. The majority of people living in these zip codes live below the 150% federal poverty threshold, according to a press release.

"Helping eligible people access critical benefits, including SSI, is part of Social Security's core mission," Social Security Acting Commissioner Kilolo Kijakazi said. "Underserved communities face additional challenges, like unreliable or no access to the internet and computers, that widen the divide. Social Security's campaign strives to reach people in their communities to tell them about the eligibility criteria for SSI and how to contact us." 

The Senior Citizens League said it's utilizing various channels including radio, television and printed materials. 

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