6 Ways Your Social Security Benefits and Taxes Are About To Get Hit by Inflation

DjelicS / Getty ImagesOne of the challenges of living on a fixed income in retirement is that any increase in taxes or consumer prices can have a major impact, no matter how small those increases are. That’s especially true when you depend heavily on Social Security benefits, which rarely provide enough income to cover anything beyond the bare essentials.Although the Social Security Administration tries to account for inflation with a yearly cost-of-living adjustment (COLA), the increase doesn’t always keep up with actual inflation. In 2022, for example, the COLA was 5.9% — but the inflation rate spent all year at 7% or higher.Inflation also play a part in the amount of taxes both retired and working Americans pay. Here’s a look at six ways inflation might hit Social Security benefits and taxes in 2024.Less Spending PowerThis has been an ongoing struggle for Social Security recipients — the inability of annual COLAs to effectively battle inflation. According to research released earlier this year by The Senior Citizens League (TSCL), average benefits fell short of inflation by roughly $1,054 from January 2021 to December of 2022. Average benefits have recovered part of that because of the high 8.7% COLA, but not nearly all of it.One of the main problems is that the formula used to determine the yearly COLA underestimates healthcare costs, according to TSCL, a non-partisan seniors advocacy group. The index used to determi …

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