Every year, the Social Security Administration (SSA) increases the payments of the beneficiaries of the various included programs, in order to allow them to keep up with inflation. This year, cost of living adjustment (COLA) is going to be much more moderate since inflation has been contained, unlike last year, which was affected by the pandemic.
Even though inflation rates showed signs of deceleration in 2023 relative to 2022, the persistent upswing in prices this year hints at a possible cost of living bump for Social Security beneficiaries in the coming year. Though it might not match the staggering 8.7% COLA adjustment of the previous year, the January adjustment will be palpable.
Projected Social Security COLA Boost for 2024
As the 2024 COLA bump for Social Security payouts hinges on the inflation rates between Q3 of 2022 and Q3 of 2023, the Social Security Administration will only stamp the official rate come mid-October.
- Retiree up: +$55
- Differently-abled Worker: +$44
- Elderly Duo (Both Beneficiaries): +$89
- Widow(er): +$51
- Widow(er) Nurturing Two Kiddos: +$106
When is the official 2024 COLA rate for Social Security benefits announced?
The official Cost of Living Adjustment (COLA) rate for Social Security benefits in 2024 will be announced by the Social Security Administration in mid-October 2023. This is because the COLA rate is determined by comparing the inflation between the third quarter of the previous year (2022) and the third quarter of the current year (2023).
In particular, the SSA uses the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for July, August, and September of each year to calculate the COLA. The CPI-W is a measure of price changes for selected goods and services, such as food, energy, and medical care, reported monthly by the federal Bureau of Labor Statistics.
The exact date for the 2024 COLA announcement is scheduled for October 12, 2023, when the CPI-W data for September 2023 is released. Current predictions from various sources suggest that the COLA increase for 2024 could be around 3%
January 2024 Will Bring More Money for Social Security Recipients
From January 2024, your eyes will spot that sweet COLA increase on your monthly payouts. With checks rolling out on pre-set Wednesdays each month, the date you see the boost will be influenced by both your birthdate and the commencement date of your Social Security benefits.
- Celebrate your big day between the 1st and 10th? The second Wednesday of January 2024 is payday.
- Born between the 11th and 20th? Your boost is set for the third Wednesday of January 2024.
- If you blow your birthday candles between the 21st and 31st, gear up for the fourth Wednesday of January 2024.
Beneficiaries of Supplemental Security Income typically find their bank accounts fuller on the month’s inaugural day, barring weekends or public holidays. For those on the Social Security roster pre-May 1997, keep an eye out on January 3, 2024.
Want the nitty-gritty? Skim through the all-in-one Social Security guide for a more profound understanding of your benefits. And if you’re mulling over applying for SSDI or SSI, we’ve got a step-by-step for that too!
How Is COLA Adjusted?
Every year, it’s up to the Social Security Administration to set the cost of living pace for Social Security payouts. The adjustment, fondly known as COLA, is rooted in the yearly surge of the Consumer Price Index specifically for Urban Wage Earners and Clerical Workers, taking into account data from Q3 of the preceding year up to Q3 of the present year.
Since 2022, any annual CPI upswing prompts the Social Security Administration to amp up the payments by an equivalent COLA percentage. Mark your calendar for October 12, because that’s when we’ll get a clearer picture of the 2024 Social Security COLA, aligning with the final inflation figures of Q3 2023.
What is the CPI-W?
The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) is a variation of the consumer price index. It is compiled by the Bureau of Labor Statistics (BLS) in the United States and measures the changes in consumer prices to which certain workers are exposed. The CPI-W is primarily used on an annual basis to reflect changes in the costs of benefits paid to Social Security beneficiaries. The index is updated monthly, usually with a one-month lag.
The CPI-W is a measure of the change over time that wage earners and clerical workers pay for a basket of goods, which consists of common expenses. These cover more than 200 common consumer products, which are arranged into eight groups. The BLS calculates the average cost that consumers pay for these goods annually, then uses those averages to track changes from year to year. These changes are expressed as a percentage that shows the change in the day-to-day cost of living. A steep increase usually indicates a period of inflation; a steep decrease usually indicates a period of deflation.
The CPI-W is calculated using the measurements in the change of the price of specific goods at specific retail outlets. These goods and outlets are kept as consistent as possible from year to year in order to provide a usable measurement of change.
The CPI-W focuses specifically on changes in consumer expenses for primarily blue-collar wage workers, representing about 32% of the U.S. population. It is a subset of the Consumer Price Index.
Are there any changes to Social Security benefits other than COLA in 2024?
Based on the information available in the search results, there are several changes expected for Social Security benefits in 2024 apart from the cost-of-living adjustment (COLA):
- Increase in Maximum Monthly Benefit: The maximum monthly payout at full retirement age is expected to increase in 2024 due to inflation. For instance, the maximum monthly payout climbed $282 a month to $3,627 in 2023. To qualify for the maximum benefit, retired workers must wait until their full retirement age to begin collecting their payout, must have worked at least 35 years, and must have reached or surpassed the maximum taxable earnings cap for all 35 years that are used to calculate their payout. Only about 2% of retired workers qualify for the maximum monthly benefit.
- Raised Income Thresholds for Workers with Disabilities: The income thresholds for workers with disabilities are likely to rise in 2024. This means that workers with disabilities will be allowed to earn more income each month while still qualifying for disability benefits from Social Security.
- Increased Earnings Limit for Beneficiaries Under Full Retirement Age: The earnings limit for Social Security beneficiaries under full retirement age will increase in 2024. This means that beneficiaries who are still working and have not yet reached their full retirement age will be allowed to earn more income without having their benefits temporarily withheld.
- Potential Changes Due to HR-4583: A new Social Security reform bill, HR-4583, was recently introduced to the U.S. House of Representatives. If passed, this bill could bring several changes to Social Security benefits in 2024. These include an across-the-board benefit increase, changes to the COLA calculation, increased minimum benefits for long-term low earners, elimination of the government pension offset and windfall elimination provisions, and combining the Social Security trust funds.
The COLA Increase Also Affects SSI and SSDI Payments
The Supplemental Security Income (SSI) and Social Security Disability Insurance (SSDI) payments will also raise when the COLA is applied. For recipients of SSI, which provides financial assistance to disabled individuals with limited income and resources, COLA adjustments are particularly significant. Since SSI eligibility and benefit amounts are tied to federal poverty guidelines, any increase in the cost of living can affect the program’s efficacy.
COLA helps maintain the real value of SSI payments, enabling recipients to keep up with rising living expenses. Similarly, individuals who receive SSDI benefits, intended for those unable to work due to a disability, also benefit from COLA adjustments.
Having said this, 3% is the percentage you’re about to see in your next payments. Stay aware, because your checks after the COLA applications will come with more money.
Steadying Social Security Gains: Insights into Economic Consequences
Social Security benefits play a significant role in bolstering the US economy, with over $1.4 trillion disbursed to more than 67 million Americans in the previous year. This program, constituting approximately 5% of the nation’s gross domestic product, injects vital cash into the economy, sustaining it as recipients use their benefits to purchase goods and services, thereby generating increased revenue for businesses and employment opportunities for workers. Consequently, the annual cost-of-living adjustment for Social Security beneficiaries holds considerable importance.
Retirees can anticipate a monthly increase of $59, bringing the estimated average payment to $1,907. This subdued adjustment mirrors the moderation in inflation throughout the current year, following substantial increases of 8.7% for 2023 and 5.9% for the previous year, the most substantial since the early 1980s. To better understand the economic implications of this adjustment, Before the Bell engaged in a discussion with David Certner, the legislative counsel and policy director at AARP.
One of the rapidly escalating costs pertains to healthcare, and this aspect often constitutes a significant portion of expenditures for the elderly, as can be readily anticipated. Healthcare expenses have a tendency to rise at a pace slightly exceeding inflation rates.