Retirees will receive a raise from Social Security in 2024, but the annual cost-of-living adjustment (COLA) to their monthly payments will be significantly lower than the increases they received in 2023 and 2022.
Starting in January, monthly benefits will rise by 3.2 percent, which will boost the average monthly benefit by $59 to $1,907—or by $94 to $3,033 for a couple who are both receiving benefits.
The annual cost-of-living adjustment is based on the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Social Security compares the CPI-W in the current year’s third quarter to the CPI-W in the third quarter of the last year that a COLA was determined. In 2023, beneficiaries received a record 8.7 percent increase, reflecting the sharp rise in consumer prices following the pandemic’s onset.
Although the 2024 increase is still above average, advocates for seniors say it doesn’t reflect the continued impact of inflation on seniors’ actual costs.
Other Adjustments
Most employees pay 6.2 percent in Social Security payroll taxes, while employers pay an additional 6.2 percent, for a total payroll tax of 12.4 percent. However, payroll tax is not withheld on the portion of income that exceeds a certain threshold, which is adjusted annually to account for inflation. In 2024, workers will pay Social Security taxes on up to $168,600, a 5.2 percent increase from $160,200 in 2023.
The annual cost-of-living adjustment also affects how much retirees can earn without reducing their Social Security benefits. If you file for Social Security before you reach full retirement age and earn income from a job, Social Security will withhold a portion of your benefits once your earnings exceed a certain threshold.
In 2024, you can earn up to $22,320 before Social Security will withhold $1 in benefits for every $2 you earn over that amount. If you reach full retirement age in 2024, you can earn up to $59,520 before Social Security will withhold $1 in benefits for every $3 you earn over the limit. In the month you reach full retirement age, the earnings test disappears.
While the earnings test can present a problem for seniors who “unretire” after claiming benefits, the benefits aren’t lost forever. Once you reach full retirement age, your monthly amount is adjusted upward to account for forfeited benefits.
