Millions of Americans rely on Social Security benefits, and those benefits are getting stretched thinner every day. Inflation is causing the cost of goods and services to skyrocket in today’s economy, so retirees can buy fewer goods with their Social Security checks. Sometimes, this might mean buying less food or doing without other necessities. Thankfully, the Social Security Administration adjusts benefits each year to account for inflation. This increase in benefits can help offset the impact of inflation and allow retirees to maintain the same standard of living. So, just how much of an increase will you see in 2024? Keep reading as we give you all the details about how much of an increase you can expect and when you will see it.
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Social Security COLA Increase For 2024
The Social Security cost-of-living adjustment for 2024 will be lower than the previous few years, but still higher than the average for the past 10 years. Benefit recipients will see a 3.20% increase in their benefits in 2024. The reason for the larger increase is because of high inflation. Remember that the COLA increase is tied to the consumer price index. The larger the increase in the cost of goods and services, the larger the increase in Social Security benefits will be.
Even though a larger check sounds great, there is something that you need to remember. This increase in benefits is not really like getting a raise. The cost-of-living increase is necessary for beneficiaries to maintain their current financial position. Without the increase, beneficiaries would see a decrease in their standard of living due to the increased cost of goods. The increase in benefits is simply an attempt to help them maintain the status quo.
In addition to the increase in Social Security payments, 2024 will see an increase in Medicare Part B premiums. If you are enrolled in Medicare Part B, you can expect an increase of just under $10 in your monthly premium. The standard premium will increase from $164.90 to $174.70 per month. Since many people have their premiums automatically deducted from their Social Security check, this increase in the premium will also lead to a slight reduction in their monthly check.
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When Will The 2024 Cost-Of-Living Adjustment Take Effect?
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The 2024 cost-of-living adjustment will take place in January 2024. Social Security recipients likely already know that they see their COLA increase in January of each year, and 2024 will be no different. You will see your monthly benefit amount increase on your Social Security check in January. This applies to both retirement benefit payments and SSI payments. If you want to find out how much your new payment will be without manually calculating it, there is an easy way to do that.
You can create a my Social Security account to view your information online. Once you log into your account, you will have access to many tools and online services. As long as you create your account before November 15, you will be able to see your new benefit amount before it takes effect. Log into your account in early December, and you should see information about the annual cost-of-living adjustment. You will see your new benefit amount displayed in your COLA notice in the message center, and you can expect to begin receiving that new benefit amount in January.
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How Changes To Social Security Benefits Are Calculated
We already mentioned that changes to benefits are calculated based on inflation, but just how is that calculation performed? Here is how the Social Security Administration determines the change to your benefit payments. The SSA uses the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the Bureau of Labor Statistics to calculate the Social Security benefit increase. The CPI-W is measured at the end of the third quarter of the current year, and the number is compared to the measurement at the end of the third quarter of the last year in which there was a COLA increase. The percentage increase in the CPI-W from one year to the next will determine the percentage increase in benefit payments.
When inflation is trending higher and higher, you can expect to see COLA increases every year. However, during periods of falling prices, you will not see a benefit increase. Thankfully, the Social Security Administration will not lower benefit payments during these periods. If there is no increase or there is a decrease in the CPI-W from one year to the next, there will simply be no COLA increase for the next year.
In addition to monthly benefit payments to retirees, the COLA increase also affects the Social Security tax limit, Social Security earnings limit, maximum Social Security benefit, and other things. We will discuss the impact of the COLA on other benefits later in this article.
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Benefits Affected By COLA Increase
You already know that retirement benefits increase as a result of the Social Security cost of living increase, but what about other benefits administered by the Social Security Administration? Here is how the COLA affects other types of benefits.
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Benefits For Retirees
As a result of the COLA increase, older Americans will see a 3.20% increase in their retirement benefits. In addition, there are a few other ways that the COLA increase affects retirement benefits. First, the Social Security earnings limit increases. This means that older Americans who are receiving Social Security benefits while still working can earn more money before reaching full retirement age without affecting their Social Security payments. In 2024, this amount increases to $22,320 for individuals who have not yet reached full retirement age, and the amount increases to $59,520 in the year in which the individual reaches full retirement age.
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Disability Benefits
Just like retirement benefits, SSDI benefits will also increase as a result of the annual COLA. The average SSDI recipient received approximately $1,489 in 2023 and can expect to see an increase of $48 per month in 2024. This increase will take effect in January, and dependents who receive benefits due to a disabled parent will also see a 3.20% increase in their payments.
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SSI Benefits
Supplemental Security Income recipients will see the same percentage increase as other Social Security recipients. Remember that you do not need a work history or earnings record to qualify for SSI payments. For this reason, these benefits are typically much lower than retirement benefits or SSDI benefits. In 2024, SSI recipients will see the maximum monthly benefit amount rise to $943 for an individual and $1,415 for an individual with an eligible spouse. Also, remember that participation in the SSI program automatically qualifies you for other assistance programs, like food stamps, housing assistance, or a free cell phone.
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Maximum Social Security Benefit
Since there is a Social Security tax limit, this means that there is a maximum amount that you can pay into the system each year. Because of this, there is also a maximum amount that you can receive in retirement benefits. This maximum amount increases every time there is a COLA increase. For 2024, the maximum Social Security benefit amount should increase to $4,873.
Remember that it takes more than just earning the Social Security tax limit each year to receive the maximum payment amount. You must earn the maximum amount for at least 35 years. In addition, you must wait until age 70 to start your benefits. Waiting until age 70 will allow you to max out your delayed retirement credits, thus making your benefit payment as high as possible.
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The Bottom Line
The 2024 Social Security increase will be the largest seen by recipients in 40 years. The COLA increase applies not only to recipients of retirement benefits but also to SSDI and SSI beneficiaries. The increase is calculated based on the CPI-W at the end of the third quarter of the current year, and there is no adjustment during years in which the CPI-W shows a decline in the cost of goods. In addition to the increase in benefit payments, the COLA increase will also cause the Social Security earnings limit and tax limit to increase.
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Frequently Asked Questions
Does the Social Security increase affect the retirement age?
No, the Social Security increase does not affect the retirement age. The increase only affects the amount of your benefit payment. Full retirement age will still be 66 or 67 for most people. While an adjustment is one of the potential future changes to Social Security, the annual COLA does not affect the retirement age. You can still start your benefits as early as age 62, but you will see a significant reduction in your primary insurance amount if you start your benefits that early. For those already receiving benefits, you can expect to see your monthly increase in January 2024.
How much is the Social Security increase for 2024?
The Social Security increase for 2024 is 3.20%. This means that your benefit payments will increase by 3.20% each month beginning in January. The increase applies to recipients of retirement benefits, SSDI benefits, and SSI benefits. Along with the increase in benefits, Medicare enrollees will also see an increase of approximately $10 per month in their Part B premium amount.Â
How much is a 3.20% increase in Social Security?
The amount of a 3.20% increase depends on how much your benefits are currently worth. If you currently receive $2,000 per month, then a 3.20% increase will lead to an increase of $64. However, if you only receive $1,000 per month, then your increase will only be $32 per month. Simply take your current benefit amount and multiply it by 3.20%. This will quickly show you how much of an increase you will see in your monthly payment.
