Social Security Administration Announces 3.2% COLA Increase for 2024
In a recent announcement, the Social Security Administration (SSA) revealed that over 71 million Americans will witness a substantial 3.2% increase in their Social Security benefits and Supplemental Security Income (SSI) payments in 2024. The typical Social Security retirement benefit is anticipated to rise by more than $50 per month, commencing in January of the upcoming year.
The Link Between COLA and Cost-of-Living
The rate of increase in federal benefit rates is tethered to the fluctuations in the cost-of-living, as measured by the Department of Labor’s Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The CPI-W ascends when inflation rates rise, which leads to an augmented cost-of-living. Consequently, prices for goods and services, on average, become more expensive. The Cost-of-Living Adjustment (COLA) comes into play to counterbalance these rising costs.
The SSA will dispatch COLA notices during the month of December to various beneficiaries, encompassing retirees, survivors, disability beneficiaries, SSI recipients, and representative payees. However, for those eager to get an early glimpse of their revised benefit amount, the SSA offers the option to securely access their Social Security COLA notice online via the Message Center within their personal account. This online access will be available in early December, preceding the arrival of the mailed notices. It’s important to note that benefit amounts will not be accessible prior to December. Therefore, beneficiaries need not contact the SSA to acquire this information.
Beneficiaries can also tailor their preferences by opting for online access to their COLA notice, consequently forgoing the mailed notice. This option can be selected by adjusting preferences within their personal “my Social Security” account’s Message Center. Additionally, individuals can receive text or email alerts for new messages, ensuring they are always informed of important updates, including their COLA notice. Those who don’t have an account yet must create one by November 14, 2023, to access their 2024 COLA notice online.
Kilolo Kijakazi, Acting Commissioner of Social Security, expressed optimism about the 2024 benefit increase, affirming that it would significantly help millions of beneficiaries in managing their expenses.
Upcoming Changes in January 2024
January 2024 is poised to herald other notable changes linked to the increase in the national average wage index. For instance, the maximum amount of earnings subject to Social Security payroll tax in 2024 is expected to rise. Moreover, the retirement earnings test exempt amount will undergo modification in 2024.
To be among the first to receive such updates, individuals are encouraged to sign up for or log in to their personal “my Social Security” account. They can opt for email or text notifications under the “Message Center Preferences” to receive courtesy notifications.
- More than 71 million Americans are set to receive a 3.2% increase in their Social Security and Supplemental Security Income benefits in 2024, as per the recent announcement by the Social Security Administration.
- Social Security retirement benefits are projected to increase by over $50 per month on average.
- This 3.2% adjustment is significantly lower than the 8.7% benefit boost witnessed in 2023.
A Closer Look at the 2024 COLA Adjustment
The annual cost-of-living adjustment for 2024 will have a far-reaching impact on the lives of more than 71 million Social Security and Supplemental Security Income beneficiaries. These annual adjustments are a crucial mechanism to ensure that the beneficiaries’ income keeps pace with the prevailing inflation rates.
What Retirees Can Expect WITH (SSI)
The anticipated adjustment will translate into an estimated increase of $50 per month in Social Security retirement benefits, on average. The average monthly retirement benefit for workers is expected to reach $1,907 in 2024, marking a significant rise from the $1,848 observed in the previous year, according to the Social Security Administration.
The majority of Social Security beneficiaries can anticipate these increases in their monthly checks, which will commence from January. However, SSI beneficiaries will witness the increase in their December payments.
The exact extent of the increase in Social Security checks for retirees is also contingent on the size of the Medicare Part B premium for 2024, which has yet to be formally announced. Typically, Medicare Part B premium payments are deducted directly from Social Security payments. The Medicare trustees have projected that the average monthly premium for 2024 may amount to $174.80, an uptick from the $164.90 observed in 2023.
How Comparing the 2024 COLA Adjustment
The 3.2% increase for 2024 stands in stark contrast to the remarkable 8.7% cost-of-living adjustment that Social Security beneficiaries experienced in 2023. The latter marked the most substantial increase in four decades and was a response to the record-high inflation rates observed during that period. Furthermore, the 2024 adjustment is also less substantial than the 5.9% cost-of-living adjustment implemented in 2022.
Over the past two decades, the average cost-of-living adjustment has hovered around 2.6%, according to The Senior Citizens League, a nonpartisan organization dedicated to the interests of seniors. The 3.2% increase for 2024 aligns with an estimate previously released by The Senior Citizens League.
The Social Security cost-of-living adjustment hinges on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). It involves adding data from the third quarter, averaging it, and then comparing it with the third-quarter average from the previous year. If an increase is observed, it determines the size of the COLA.
Challenges in the Face of Rising Inflation
The 2024 adjustment comes at a time when many retirees continue to grapple with soaring prices. AARP Chief Executive Jo Ann Jenkins acknowledged the relief this increase would bring to retirees, emphasizing its role in helping them cope with the escalating costs of everyday essentials.
Jenkins further emphasized that older Americans are still feeling the financial strain when it comes to purchasing groceries and fuel. This underscores the importance of every dollar in their budgets. She also called for bipartisan efforts in Congress to ensure the long-term stability of the Social Security program. It’s important to note that the program faces a funding shortfall in the coming decade. Proposals to address this issue have included revising the way the annual cost-of-living adjustment is calculated.
Advocates for change have suggested that the Consumer Price Index for the Elderly (CPI-E) might be a more appropriate measure for assessing seniors’ expenses, allowing them to maintain their purchasing power. However, research has indicated that this alternative measurement might not necessarily lead to a larger annual boost.
Challenges Persist for Vulnerable Seniors
Tracey Gronniger, Managing Director of Economic Security and Housing at Justice in Aging, a national organization committed to combating senior poverty, expressed her satisfaction with the 2024 COLA. However, she underscored that the increase might still fall short, particularly for seniors living in poverty.
For many low-income beneficiaries, higher Social Security benefits resulting from recent cost-of-living adjustments have brought challenges. These include the risk of losing access to crucial assistance programs such as the Supplemental Nutrition Assistance Program (SNAP) or rental assistance. Some have also found themselves liable for taxes on their Social Security benefit income for the first time or have experienced higher tax rates on this income. Depending on specific income thresholds that remain unadjusted for inflation, up to 85% of Social Security benefits may be subject to taxation.
Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League, emphasized that Social Security has never been designed to provide an exceedingly generous income. It typically replaces about 30% or less of an individual’s pre-retirement earnings and is considered relatively modest in terms of income.
The 2024 COLA adjustment brings a glimmer of hope for many beneficiaries, but the challenges faced by vulnerable seniors in maintaining their financial stability, particularly in the face of rising prices, remain a significant concern.
In conclusion, the 3.2% COLA increase for 2024 brings some relief to over 71 million Americans, helping them tackle the escalating costs of living. However, it is important to acknowledge the persistent challenges faced by vulnerable seniors and the importance of addressing these issues to ensure their financial well-being in the years to come.