The 2024 COLA: A Smaller Increase After a Record-High Year

In this article, The Social Security Administration (SSA) announced that the cost-of-living adjustment (COLA) for 2024 will be 3.2%, meaning beneficiaries of Social Security and Supplemental Security Income (SSI) benefits will experience a modest increase starting January 2024 compared to 5.9% experienced last year – this represents a smaller increase than in 2023 when COLA rates reached their highest since 1982; according to the SSA, retirees can expect an average increase of $57.30 each month from this COLA.

What is the COLA and how is it calculated?

COLA is an annual adjustment designed to protect the purchasing power of Social Security and SSI benefits against inflation. It’s calculated based on the percentage change in Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), between third quarter of one year ago when COLAs were determined and third quarter this year – measuring average changes in prices across an assortment of goods and services typically purchased by urban wage earners and clerical workers.

Why is the 2024 COLA smaller than the 2023 COLA?

The 2024 COLA is smaller than its 2023 counterpart due to the lower inflation rate as measured by CPI-W in 2024 versus 2023. From 2022-2023, inflation increased 6.1% resulting in 5.9% COLA but in 2024 and beyond only 3.4% increased from third quarter 2023-2024 thus yielding 3.2%.

What are the other changes that will affect Social Security beneficiaries in 2024?

Other changes affecting Social Security beneficiaries in 2024 besides COLAs include:

• The maximum earnings subject to Social Security payroll tax will increase from $147,000 in 2023 to $168,600 in 2024; meaning workers who earn over that threshold in 2024 will only owe taxes on up to the first $168,600 earned.
•  Starting in 2024, workers who are younger than their full retirement age (FRA) will see their earnings limit rise from $19,560 in 2023 to $22,320; any earnings over this threshold will cause one dollar from each $2 earned over $22,320 to be subtracted from their Social Security benefits.
• Depending on when you were born (most commonly after 1960 it’s 672).For workers reaching their FRA in 2024, earnings limits will increase from $51,960 in 2023 to $59,520; every time an earnings amount surpasses this threshold during 2024, one dollar will be deducted from Social Security benefits until reaching FRA. Afterward, no further restrictions or reduction in benefits apply.

• Medicare Part B premiums will be released later this year by the Centers for Medicare and Medicaid Services (CMS). Most beneficiaries currently pay $170.10 monthly; this could change as health care costs continue to increase. The premium could potentially rise due to inflation.

How can beneficiaries access their COLA notices online?

The Social Security Administration will mail COLA notices to beneficiaries in December 2023; however, they can also access them online through the Message Center of their personal my Social Security account. To do this safely and conveniently, beneficiaries need to create or log into their my Social Security account, opt out of receiving notices by mail that are also available online, and choose text or email alerts when there’s something waiting in their Message Center.

Conclusion

While the 2024 Cost-of-Living Adjustment (COLA) increase is smaller than 2023’s COLA increase, it still helps millions keep pace with rising cost of living expenses. Social Security and SSI beneficiaries should remain mindful of any other changes that might impact their benefits or taxes in 2024 and use the online tools offered by SSA to access COLA notices or obtain other necessary information. Social Security/SSI benefits provide vital sources of income to many Americans and the COLA ensures they do not lose value over time.