Social Security COLA update is coming: What retirees need to know
Retired Americans collecting Social Security benefits will find out this week just how big their cost-of-living adjustment will be in 2024 as they continue to confront unusually high inflation.
The Social Security Administration will announce on Thursday the 2024 cost-of-living adjustment for individuals who receive retirement or disability benefits. The increase is expected to be far smaller than last year's, due to cooling inflation.
The Senior Citizens League, a nonpartisan group focusing on issues relating to older Americans, estimated the adjustment could be 3.2%, based on August inflation data.
SOCIAL SECURITY COST-OF-LIVING ADJUSTMENT COULD BE BIGGER THAN EXPECTED NEXT YEAR
The annual Social Security change is calculated based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, or the CPI-W, from July, August and September. The CPI-W posted a 3.4% increase in August.
Should Social Security beneficiaries see a 3.2% increase in their monthly checks next year, it would mark a steep decline from 2023, when recipients saw an 8.7% bump – the highest in four decades. However, it remains higher than the 2.6% average increase recorded over the past two decades.
In this photo illustration, a Social Security card sits alongside checks from the U.S. Treasury on Oct. 14, 2021, in Washington, D.C. (Kevin Dietsch/Getty Images / Getty Images)
An increase of that magnitude would raise the average retiree benefit of $1,790 by about $57.30 per month.
Even with last year's record-high increase, many retirees say they are struggling to keep up with high inflation, according to Mary Johnson, a research analyst at the Senior Citizens League who conducted the analysis.
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"Nobody is getting rich," Johnson said. "The reality is that the dollar amount of the COLA increase received is meager at best, with the average monthly retiree benefit only $1,790 in 2023."
Big benefit increases are not always good news for recipients.
Higher Social Security payments are a bit of a Catch-22. They can reduce eligibility for low-income safety net programs, like food stamps, and can push people into higher tax brackets, meaning retirees will pay more taxes on a bigger share of their monthly payments, Johnson said.
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Since 1984, retirees have owed taxes on their benefits if their income – including their Social Security payments – is more than $25,000 if they are single, or $32,000 if they are a married couple. Individuals who earn more than $34,000 and couples who earn more than $44,000 can be taxed on up to 85% of their benefits.
The group has pushed Congress to adopt legislation that would index the adjustment to inflation specifically for seniors, such as the Consumer Price Index for the Elderly, or the CPI-E. That index tracks explicitly the spending of households with people aged 62 and older.
"An inflation measure that does not adequately measure and accurately accounts for the portion of income spent on health care tends to undercount the actual rate of inflation and shortchange the Social Security COLA," Johnson said.