Social Security 2024 Cost-of-Living Adjustment (COLA): Anticipate Larger Payments in the Coming Year
- Category: News
Social Security recipients can look forward to increased payments starting in 2024, with a 3.2% cost-of-living adjustment (COLA) to combat rising inflation levels. This boost extends to Supplemental Security Income (SSI) recipients, who will experience their first enhanced Cost-of-Living Adjustment (COLA) payment this month.
Annually, the Social Security Administration determines COLA based on the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers from the third quarter of the previous year to the third quarter of the current year. The forthcoming COLA is set to provide seniors with a much-needed financial uplift.
For those claiming benefits at the earliest age of 62, a quarter of all seniors, the decision involves trade-offs. While early claiming maximizes the number of received checks, it results in a reduced monthly payout, compounded by smaller COLAs as they are percentage-based on the benefit.
Cost-of-Living Adjustment (COLA) Notices:
In preparation for the 2024 increase, the Social Security Administration will issue COLA notices to beneficiaries, outlining exact benefit adjustments. Individuals can also access this information through their Social Security accounts.
The calculation of the new benefit involves applying the annual COLA (3.2% for 2024) to the primary insurance amount (PIA), representing the benefit at full retirement age (FRA). While the government performs additional calculations for early claimers, individuals can estimate their 2024 benefit by adding 3.2% to their 2023 benefit.
For instance, an average 62-year-old claimer in 2024, with an estimated $1,275 monthly benefit from December 2022, might expect around $1,430 per month after factoring in the 3.2% COLA—an increase of approximately $44 per month. However, high earners and individual work histories will influence actual benefits.
Social Security Administration announces COLA increase for 2024
Calculation of COLA:
Despite the cost-of-living adjustment (COLA), concerns persist about the adequacy of future Social Security checks. Some advocate for using the Consumer Price Index for the Elderly (CPI-E) instead of the current Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to calculate COLAs, emphasizing the need to ensure the program meets the evolving needs of beneficiaries.
The formulaic approach to calculating the new benefit by applying the annual COLA to the primary insurance amount (PIA) simplifies the estimation process for recipients. While the government conducts additional calculations for early claimers, the ability for individuals to approximate their 2024 benefits by adding 3.2% to their 2023 benefits provides a practical and accessible way to gauge the impact of the adjustment.
However, amid the positive news of a cost-of-living adjustment (COLA) increase, concerns persist about the long-term adequacy of Social Security checks. Advocates for using the Consumer Price Index for the Elderly (CPI-E) argue that this index better reflects the spending patterns of seniors, addressing the unique financial challenges faced by the elderly. This ongoing discussion emphasizes the need for continuous evaluation and adaptation of the Social Security program to ensure it effectively serves the evolving needs of its beneficiaries.
