Social Security beneficiaries will receive a modest 3.2% cost-of-living adjustment (COLA) in 2024, the Social Security Administration announced this morning—which is much less than 2023’s historic 8.7% COLA but is still comfortably above the 2.6% average COLA over the past 20 years.
The 3.2% COLA, which takes effect in January 2024, means the current average Social Security benefit of $1,790 will increase by about $57.30 per month starting in January. That’s significantly less than the $144 raise the average Social Security beneficiary received for 2023 after this year’s 8.7% COLA.
“Social Security and SSI benefits will increase in 2024, and this will help millions of people keep up with expenses,” said Kilolo Kijakazi, Acting Commissioner of Social Security.
Some other adjustments that take effect in January of each year are based on the increase in average wages. Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $168,600 from $160,200.
The program pays roughly $1.4 trillion in benefits to more than 71 million people each year, including low-income individuals with disabilities.
The official 2024 Social Security COLA was determined shortly after the Bureau of Labor Statistics released September Consumer Price Index data this morning—the final variable used to compute next year’s COLA.
The CPI Index for Urban Wage Earners and Clerical Workers (CPI-W) is used to calculate the annual adjustment. CPI-W changes for the months of July, August and September are added together and averaged, then compared with the Q3 average from the prior year. The percentage difference is the amount of the next year’s COLA.
Retirees pessimistic about Social Security
The 3.2% Social Security cost of living adjustment (COLA) for 2024 is well above the 2.6% average over the past 20 years. Still, a new retirement survey by The Senior Citizens League (TSCL) indicates that older adults are pessimistic about their finances in coming months and the growing potential of Social Security benefit cuts.
Sixty-eight percent report that their household expenses remain at least 10% higher than one year ago, although the overall inflation rate has slowed. This situation has persisted over the past 12 months.
“Inflation isn’t going down; it’s just slowing. Although prices aren’t increasing as fast as a year ago, prices are still higher than one year ago,” Johnson said in a recent TSCL newsletter addressing the 2024 COLA situation.
Worry that retirement income won’t be enough to cover the cost of essentials in the coming months is a top concern of 56% of survey respondents. Social Security benefit cuts are an even bigger concern, ranked as the No. 1 worry by nearly 6 out of 10 survey participants (59%). Over the past year, benefit cuts and trims have affected a large percentage of older Americans who can least afford them: low-income households.
A year ago, The Senior Citizens League warned that higher incomes due to the 5.9% and 8.7% COLAs in 2022 and 2023 could potentially affect eligibility for low-income assistance programs such as SNAP and rental assistance. Earlier this year, federal emergency COVID assistance for SNAP (food stamps) and Medicaid also ended. Surveys conducted by TSCL in 2022 and this year suggest that significant numbers of lower-income older households have lost access to some safety net programs over the past 12 months.
Next up: 2024 401(k) contribution limit announcement
Next up, the IRS is expected to announce 2024 contribution limits for tax-advantaged retirement plans and accounts sometime later this month. For 2023, the IRS announced last October 21 it raised the 401(k) and 403(b) contribution limit by $2,000 from $20,500 to $22,500, and the catch-up provision for participants aged 50 or over increased from $6,500 to $7,500, totaling $30,000 in employee contributions alone.
Annual IRA contributions increased to $6,500 in 2023 from $6,000, and the catch-up provision remained unchanged at $1,000.
Resources available
Social Security and SSI beneficiaries are normally notified by mail starting in early December about their new benefit amount. The fastest way to find out their new benefit amount is to access their personal “my Social Security account” to view the COLA notice online. It’s secure, easy, and people find out before the mail arrives. People can also opt to receive a text or email alert when there is a new message from Social Security—such as their COLA notice—waiting for them, rather than receiving a letter in the mail. People may create or access their my Social Security account online at www.ssa.gov/myaccount.
SEE ALSO:
- Updated 2025 Social Security COLA Forecasts Point Toward Lower Raise
- 2025 Social Security COLA Estimate Jumps to 3%
- Official 2024 Social Security COLA Announcement Set for Oct. 12
- Final 2024 Social Security COLA Estimate Before the Real Thing: 3.2%
- Historic 8.7% Social Security COLA Finalized for 2023
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
