Major Announcement on Social Security Payments: Here’s What to Know

Blank Social Security checks are run through a printer at the U.S. Treasury printing facility in Philadelphia on Feb. 11, 2005. William Thomas Cain/Getty Images

The Social Security Administration says that its 2024 cost-of-living adjustment (COLA) for payments will be 3.2 percent, a much smaller increase following a couple of inflation-fueled annual boosts.

The COLA applies to individuals who get retirement or disability benefits. The increase is lower than the 8.7 percent in 2023 and last year’s 5.9 percent because of cooling inflation, which was cited by the agency in making its adjustment.

The Social Security program pays roughly $1.4 trillion in benefits to more than 71 million people each year, including low-income individuals with disabilities. The government uses taxes from working people to pay benefits to people who have already retired, people who are disabled, the survivors of workers who have died, and dependents of beneficiaries.

Methodology

The annual Social Security payment change is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) data for July, August, and September. Last month, the CPI index remained at 3.7 percent, and the index for urban wage earners was 3.6 percent, the Bureau of Labor Statistics stated on Oct. 12.

“Seniors tend to spend more on medical care in general, including some out-of-pocket expenses like prescription drug costs, that can be very significant,” Mark Hamrick, senior economic analyst at Bankrate, told the Associated Press. “Of course, food, shelter, and energy costs are all still elevated. Those are things most people cannot go without.”

While the 3.2 percent raise is smaller than the two most recent adjustments, it still tops the 2.6 average over the past 20 years, Senior Citizens League policy analyst Mary Johnson said.

The annual percentage increases over the past five years were 2.8 percent, 1.6 percent, 1.3 percent, 5.9 percent, and 8.7 percent in 2018, 2019, 2020, 2021, and 2022, respectively, according to the Social Security Administration (SSA).

How Much?

The COLA is intended to help meet higher prices for food, fuel, and other goods and services.

In August, the average monthly payment for Social Security beneficiaries stood at $1,705.79, according to SSA. With a 3.2 percent COLA, it would mean an extra $54.58 each month, beginning in January, according to government estimates.

Ms. Johnson estimated that it would add $57 to the average retiree payment.

“That’s maybe not going to cover a rent increase,” she said.

Social Security is financed by payroll taxes collected from workers and their employers. The maximum amount of earnings subject to Social Security payroll taxes for 2023 is $160,200, up from $147,000 in 2022.

To determine what amount of Social Security you’ll receive, the government calculates a percentage of your highest wages from your top 35 years of earning, factoring in when you choose to start receiving benefits.

“Compared to last year’s 8.7 percent increase, this is going to feel small and the perception is that it’s not keeping up with the inflation and the higher costs that retirees are still seeing,” said Martha Shedden, president of the National Association of Registered Social Security Analysts.

Medicare Part B

Also on Oct. 12, the Centers for Medicare and Medicaid Services announced that the standard Medicare Part B premium that’s paid by most beneficiaries will increase by $9.80 per month to $174.70 in 2024 from $164.90 in 2023.

The increased Medicare premiums will “absorb a disproportionate share of the COLA for most people,” according to Kathleen Romig, director of Social Security and Disability Policy at the Center on Budget and Policy Priorities.

“Seniors and people with disabilities tend to spend a greater share of their incomes on health care, and medical prices are rising faster than overall inflation,” she said, noting that most people will still get higher benefit checks overall.

‘We Still Have Inflation’

Ms. Johnson said many seniors have reported that they’re falling behind, despite the 8.7 percent increase from last year.

“What we are hearing from our surveys is the household budgets went up by more than the amount of their COLA ... that is what is worrying people today,” she said. “We still have inflation with us.”

Because the CPI-W assumes that urban “workers spend about 7 percent of their income on health care,” it’s a problem for retirees.

“Our surveys have found that older adults spend 12 percent to 16 percent, even up to 24 percent on health care,” Ms. Johnson said.

AARP, the interest group that represents older Americans, called on Congress to overhaul the Social Security program amid reports that indicate the system may run out of money in the coming years.

“AARP is urging Congress to work in a bipartisan way to keep Social Security strong and to provide American workers and retirees with a long-term solution that both current and future retirees can count on,” AARP CEO Jo Ann Jenkins said in an Oct 12 statement. “Americans work hard to earn their Social Security, and it’s only fair for them to get the money they deserve.”

The Associated Press contributed to this report.