As the new COLA date approaches, projections indicate that monthly Social Security payments will slightly increase by around 3% in 2024.
This is a relatively modest adjustment in their payments for the year 2024, largely due to the slowdown in the inflation rate.
If inflation follows its recent trajectory in the coming months, it is estimated that the monthly payments to recipients will increase by approximately 3% in 2024. These estimates are drawn from assessments made by analysts and nonprofit organizations. These projections follow an 8.7% increase in the cost of living in 2023, driven by significant inflation.
For the roughly 67 million individuals who receive Social Security benefits, the yearly payment adjustments can significantly impact their ability to cover expenses. Many retired individuals depend heavily on Social Security as their primary income source during their retirement. This is because Social Security is designed to account for inflation and ensure financial stability.
While the inflation rate experienced a slowdown in June, marking its slowest pace in over two years, this decline is not uniform, and prices for certain goods and services are still rising notably.
It is projected that the cost-of-living adjustment (COLA) for Social Security will increase by 3%. As a result, retired workers can expect their average monthly payments to go up by approximately $55, reaching $1,892 in January from the current amount of $1,837.
The annual adjustment for the cost of living is tied to the average inflation observed in July, August, and September, employing the Labor Department’s consumer-price index for urban wage earners and clerical workers. The data from July, released on Thursday, indicates what recipients might expect when the Social Security Administration announces the official COLA for 2024 in October.
According to Mary Johnson, a policy analyst specializing in Social Security and Medicare at the Senior Citizens League, a nonprofit advocating for strengthening these benefits, the estimated 3% increase is slightly higher than the average 2.6% COLA observed over the past two decades.
Here’s an estimate of the average monthly social security payment for retired workers.
Based on a 3% COLA:
- 2024: $1,892
- 2023: $1,837
For the government, a more measured rise in monthly Social Security payments would be seen as positive news, considering that the 8.7% increase marked the largest cost-of-living benefit adjustment over the past forty years.
One positive development for retirees is the stock market’s performance this year. In contrast to the year 2022, where the stock and bond markets negatively affected retirees’ investments, investors aged 65 to 69 experienced a 5.3% increase in their 401(k) account balances over the last twelve months, with an average of $223,100, according to Fidelity Investments, the leading provider of 401(k) plans in the US.
Even though retirees receive an annual increase, the premiums for Medicare Part B, which includes outpatient care and doctor visits, are typically deducted from their Social Security payments. According to Medicare’s trustees, the standard Part B premium is predicted to increase by $9.90 to $174.80 per month in the next year. As a result, the overall net increase for many retirees may be lower.
According to a recent study conducted by AARP, 40% of Americans who are 65 years or older depend on Social Security for at least 50% of their income. Additionally, about 14% of beneficiaries in this age group depend on these benefits for 90% or more of their income.
A nonprofit organization, the Committee for a Responsible Federal Budget, is also predicting a 3% increase in 2024. They believe that in the event of continued increases in gas prices, there may be even a higher COLA. In a report from March, Social Security officials also anticipated a benefit increase of about 3.3% for the following year.
According to Maya MacGuineas, who is the president of the Committee for a Responsible Federal Budget, the Social Security trust fund’s insolvency date has been moved up by one year. This change is due to the 8.7% increase in the cost of living adjustment (COLA) for the current year. She states that a 3% COLA is not expected to significantly affect the projected insolvency date, which Social Security’s trustees predict to occur in 2034. If Congress doesn’t take steps to bolster the program, beneficiaries will receive around 80% of their scheduled benefits after this point.
The age at which retirees are eligible to start receiving Social Security benefits varies. The benefit amount increases with each month of delay. Cost-of-living adjustments start at age 62, whether benefits are claimed then or deferred, and they continue throughout one’s lifetime.
An increase in Social Security benefits due to a cost-of-living adjustment can result in individuals owing federal income tax. The income thresholds of $25,000 for individuals and $32,000 for couples have not been adjusted for inflation. These annual income figures encompass half of an individual’s or couple’s Social Security benefits.
According to data from the Social Security Administration, in 2021, 46% of retirees were subject to federal income tax on a portion of their benefits, a significant increase from the 8% observed in 1984.