The 2024 Cost of Living Adjustment (COLA) promises a boost to your monthly Social Security payouts. The Social Security framework of the U.S. stands as a pillar of the nation’s welfare programs, funneling benefits and aid to countless Americans throughout various life milestones. From retirement to disability and even the unfortunate passing of family members, it acts as a safety net.
The COLA is determined by the Social Security Administration (SSA) by looking at how much the prices have gone up for things that people commonly buy. Specifically, it’s calculated by comparing the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of the year before to the third quarter of the current year. This helps ensure that people’s incomes keep pace with the rising cost of living.
Social Security Payments: How Much Will You Claim Next Month
Official numbers on the 2024 adjustments are not still unveiled, so these are just COLA predictions so far. It will be revealed only post the Labor Department’s release of the September inflation figures on October 12th. However, financial gurus are making educated guesses. Buzz is that there’s a potential 3% COLA on the horizon for Social Security benefits in 2024. Keep in mind, this number is in flux, subject to inflation trends before the final call.
This could be your payments growths:
- Retired individuals: Estimated monthly disbursement of $1,893.74, a jump of $55.16
- Partners: Monthly estimates hover around $918.06, up by $26.74
- Survivors: Expected monthly average of $1,497.70, a hike of $43.62
- Disabled folks: Projected monthly average of $1,389.92, a rise of $40.48
Now, compared to last year’s more generous COLA, these numbers might seem a tad underwhelming. But every cloud has its silver lining. A moderate COLA hints at inflationary pressures easing up, spelling good news for economic steadiness and market health. This climate could be a boon for those retirement nest eggs, potentially fattening them up for those who lean on Social Security.
Social Security Programs Impacted by the Cola Increments
This boost in COLA can sometimes push certain retirees beyond income thresholds, forcing them to pay income taxes on a portion of their Social Security payouts. As these benefits continue to grow over time thanks to COLA, an increasing number of beneficiaries find themselves in the position of paying income taxes on a portion of their benefits.
For those Social Security beneficiaries who are also enrolled in Medicare, information about their new, higher benefit amount for 2023 will become available in December. You can expect to receive this information either through the mailed COLA notice or by checking the My Social Security Message Center on ssa.gov. However, it’s important to keep in mind that any rise in Part B premiums can potentially offset the increase in Social Security benefits resulting from COLA.
In the other hand, benefit payments triggered by COLA may contribute to Social Security’s potential future shortfalls. Unless Congress takes necessary action before the trust funds become insolvent, the revenue generated from current tax receipts might only be enough to cover 80 percent of the promised benefits. The Supplemental Security Income (SSI), and the Social Security Disability Insurance (SSDI) are also impacted for good when the COLA is raised.
Recap: 2023’s COLA Boost for Social Security
For those wanting a quick flashback, the COLA uplift for Social Security perks in 2023 was 8.7%. A quick snapshot of the specifics:
- Beneficial payouts for a whopping 65 million plus Social Security beneficiaries started January 2023.
- Enhanced disbursements to a sizable chunk of 7 million SSI beneficiaries.
- The maximum earning slab that’s subject to Social Security tax got recalibrated to $160,200.
- The earning cap for those not yet at the “full” retirement age shifted to $21,240.
- Those touching the “full” retirement milestone in 2023 saw their earnings cap adjust to $56,520.
- For those at or beyond the “full” retirement age throughout 2023, there’s no ceiling on earnings.
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Who Is Eligible for Social Security Benefits?
Qualification for Social Security benefits primarily hinges on an individual’s work history and the extent of their contributions through Social Security taxes. Typically, the standard prerequisite is a minimum of 10 years of employment with corresponding Social Security tax payments, as outlined by the SSA.
The SSA meticulously maintains records of the duration for which individuals have fulfilled their Social Security tax obligations, so every individual’s benefits are precisely determined.
These resources are also accessible through the work record of a current or former spouse. This implies that even if an individual has not been employed or contributed to Social Security for a decade, they could potentially qualify for benefits rooted in their spouse’s employment history.
COLA’s Role in Shaping Social Security
The cornerstone of Social Security payouts is the much-discussed COLA. Its mission? To shield beneficiaries from inflation’s pinch. The mechanism banks on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) – a barometer gauging price fluctuations over time, from the perspective of hourly wage workers and desk jockeys. The Social Security Administration (SSA) pits the third-quarter CPI-W of a year against its predecessor, with the percent surge shaping the next year’s COLA.
There have been times when the COLA surge was sizeable. Take 2023, for instance, when it clocked in at 8.7%, propelled by a stark year-on-year inflation spike in the 2022 third-quarter CPI-W. While this uplifted many a beneficiary’s wallet, it sent ripples across the broader economic landscape, nudging markets and savings patterns.