There are two important days every year for people on Social Security—the day they find out how much their checks will go up because of the annual Cost-of-Living-Adjustment (COLA), and the day they start getting the extra money. October is the month they find out how much.

 

Automatic Social Security Cost-of-Living Adjustments have been in effect since January 1, 1975. They are calculated based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Data from the third quarter is added and averaged and then compared with the third quarter average from the previous year. That determines the size of the COLA.

 

For 2024, the 66 million Americans who receive a Social Security check will get an increase of 3.2% beginning in January. That means the average monthly retiree benefit of $1,790 will increase by $57.30.

 

The 3.2% COLA for 2024 is a substantially lower increase than the 8.7% COLA in 2023 and the 5.9% in 2022, levels that had not been seen in 40 years because of high inflation. On the surface, you may think lower inflation is a positive for Social Security recipients. But inflation is still going up, just not as quickly.  Add the last three COLAs together (5.9% + 8.7% + 3.2%) and it means Social Security beneficiaries are dealing with inflation that’s almost 18% higher than it was three years ago, and the prices seniors pay for goods is not going down.

 

The COLAs are supposed to help seniors keep pace with inflation. But some argue that the way Social Security COLAs are calculated is a problem because it’s based on a consumer price index for workers, not for older folks whose spending is different than it is for people still in the workforce.

 

According to AARP, annual Social Security COLAs typically aren’t enough to offset a senior’s increases in the cost of housing, food, transportation, and their much higher spending on healthcare and prescription drugs. For example, while the 2024 COLA is 3.2%, The Senior Citizens League (TSCL) is projecting that Medicare premiums will go up by approximately 9% in 2024, going from $164.50 to $179.80 per month.

 

Research by TSCL shows that Social Security benefits have lost more than 30% of their purchasing power since 2000 primarily because COLAs are too low and health care costs are out of control. The Senior Citizens League claims that the CPI-W underestimates inflation experienced by Social Security recipients because it underweights healthcare and housing costs for seniors. TSCL wants Congress to adopt legislation that would base the COLA on the Consumer Price Index for the Elderly (CPI-E).

 

Some other adjustments that take effect every January 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, SSA said. For a detailed list of 2024 benefits by category compared to 2023 benefits, see SSA’s COLA fact sheet.

 

 

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