Good News: Your Social Security Benefits Will Increase This Much in 2024
Over 70 million Americans who receive Social Security or Supplemental Security Income (SSI) benefits will see a 3.2% cost of living adjustment (COLA) in 2024, the Social Security Administration announced recently. For instance, that means the September 2023 average retiree benefit of $1,793 will increase by $57 starting in January 2024. This increase is smaller than either the 5.9% COLA in 2022 or the 8.7% boost in 2023, mostly due to lower levels of inflation. However, it’s designed to provide relief for seniors facing inflation-driven hikes in the costs for essentials, like food, housing, transportation and healthcare.
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The Basics of Social Security COLAs
COLA increases help seniors on fixed incomes afford rising costs for housing, food and other essential expenses. Without them, the purchasing power of Social Security benefits would erode over time.
At 3.2%, the Social Security COLA for 2024 is significantly less than half than the 8.7% adjustment beneficiaries received in 2023. That sharp reduction in benefit growth rates reflects the fact that the measured rate of inflation has cooled considerably from the 40-year highs seen last year. This upcoming increase is meant to aid retirees in coping with some, if not all, of the higher prices they will face in the next year.
A 3.2% bump will put less than $100 more in the average retiree's pocket each month. While it may not have much importance for wealthier retirees, it’s likely to provide welcome relief to lower- and middle-income beneficiaries without forcing a drain on the Social Security Trust Funds.
The increase will take effect in January 2024 for the more than 66 million Social Security beneficiaries. Around 7.5 million SSI recipients will see the bump slightly sooner, starting with their payment on Dec. 29, 2023. Some people receive both retirement benefits and SSI, but the total number of recipients is about 71 million.
By law, the COLA is based on growth in the Consumer Price Index (CPI) for Urban Wage Earners and Clerical Workers (CPI-W) during the third quarter, year-over-year. The CPI-W rose 3.2% between the third quarter of 2022 and the third quarter of Q3 2023. That set the Social Security benefit at the same amount.
Social Security COLA in Action
The average monthly benefit a senior receives, as of September 2023, is $1,793, which means they would see a monthly rise of around $57, from $1,793 to $1,850 per month. That comes out to an extra $684 each year that they can put toward groceries, gas or gifts for grandkids.
The size of a Social Security benefit is based on a credit system. Other retirees may receive different amounts based on their lifetime earnings. For instance, for someone who claims $2,364 per month, the 3.2% COLA amounts to an extra $76 monthly or $912 annually. Someone who receives the 2023 maximum benefit of $4,555 will get an extra approximately $145 per month or $1,740 per year.
What to Do About the COLA News
Benefit recipients can expect a letter from the Social Security Administration explaining the increase. However, you don't have to do anything to receive the higher benefit from Social Security. If you’re already getting benefits, your January check will automatically be larger.
One move that can help you make the most of it is to budget now for the upcoming bump in your income. The extra money could go toward an emergency fund, gifts for loved ones or vacations with family. Alternatively, you may want to look at directing the COLA increase toward investments, charitable giving or other worthwhile causes.
Bottom Line
A 3.2% cost-of-living adjustment to Social Security benefits in 2024 will help offset rising prices at the grocery store, gas pump and other places for retirees on fixed incomes. While the increase lags 2022's 8.7% COLA, it provides a raise that paces inflation without draining the Social Security trust funds. Retirees can put this extra money to work shoring up emergency savings, enjoying retirement or giving back to causes that matter.
Retirement Planning Tips
A financial advisor can help you optimize Social Security claiming strategies. Finding a financial advisor doesn't have to be hard. SmartAsset's free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you're ready to find an advisor who can help you achieve your financial goals, get started now.
Get answers to one of the most important questions in retirement planning by using SmartAsset's Social Security calculator to estimate the amount of benefits you will receive.
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