In 2024, the Cost of Living Adjustment, or COLA, is here to give a little financial boost to millions receiving Social Security retirement benefits by increasing them around $60 per month.
Simply put, COLA makes sure that people’s benefits keep up with inflation, so they can afford to buy what they need.
While the official rate of increase for 2024 hasn’t been shared yet, some experts, like those at the Senior Citizens League, predict benefits will go up by 3.2%. This is quite a drop compared to 2023, when benefits went up a hefty 8.7% due to a sharp rise in prices for consumers in August.
So, in simple terms, this adjustment helps secure the buying power of folks depending on Social Security, making sure they don’t fall behind amid rising costs.
How is the COLA calculated?
Social Security determines the COLA based on average inflation rates during the months of July, August and September. This method is intended to protect beneficiaries from possible losses in purchasing power.
The Consumer Price Index for Urban Wage Earners and Employees (CPI-A) plays a crucial role in this calculation. By comparing the third quarter of the current year with that of the previous year, the new COLA is obtained.
Impact on beneficiaries
An estimated 70 million beneficiaries stand to gain from an impending adjustment. With the average retirement check currently pegged at $1,827, early calculations hint at an increase, potentially boosting the monthly amount to approximately $1,885 by January 2024.
This suggests a promising addition of around $60, although, as with all averages, some beneficiaries might see an uptick slightly less than the projected figure.
It’s important to be careful when considering these early numbers. They offer a peek into potential future trends, but they’re still uncertain guesses at this point. Both industry professionals and retired folks are excitedly waiting for the official statement from the Bureau of Labor Statistics, set to be out this October.
Now, if you’re someone who receives Supplemental Security Income benefits, it’s a good idea to manage your hopes. The expected raise in benefits for this group looks like it won’t be huge. So, it’s a smart move to stay patient until the real numbers are out in the open. Keep in mind, even a small increase is designed to give more financial help and relief to those relying on it.
Staying updated and ready for such adjustments is a major step in taking charge of your financial well-being in the times ahead. By doing so, you’re setting yourself up for a more stable and secure financial future.
How is the COLA 2024 payment determined?
The COLA depends on two components: the CPI-W and the COLA percentage contracted by the company. The CPI determines the rate of inflation and is compared annually. When consumer prices fall-or if inflation has not been high enough to justify a COLA increase-beneficiaries do not get COLA. If there is no CPI-W increase, there is no COLA increase.
In the Social Security Act, the set-aside clause prevents the amount of some Social Security beneficiaries benefits from decreasing from year to year if there is an increase in standard Medicare Part B premiums. If the increase in Part B premiums causes the beneficiaries Social Security amount to be lower, then the Part B premium will be reduced to ensure that the face value of the Social Security benefit remains the same.
Normally, few people are exempt; however, in years when there is no Social Security COLA, more people may be affected by this provision. In 2018, for example, there was a 2% Social Security COLA, and 28% of Part B enrollees were exempt from damages. In 2016, there was no COLA and 70% of enrollees were exempt from the Part B premium increase.
Some employers, such as the United States military, occasionally grant a temporary COLA to employees who must perform work assignments in cities with a higher cost of living than their home city. This COLA expires at the end of the work assignment.
WHEN WILL COLA 2024 ARRIVE TO SOCIAL SECURITY?
As of January 2024 all Social Security benefits will have the 3.2% increase. However, some Americans will be able to enjoy a new check with the added COLA before next year arrives.
Supplemental Security Income recipients will get this early benefit on December 29, 2023 if they activate Direct Deposit. This is due to a timing irregularity that causes the Administration to send the check early.
Therefore, getting this payment with the COLA already added will be possible. So the last payment of 2023 will actually be the first payment of 2024. Although at tax level actually the payment belongs to the next year. In the case of not having Direct Deposit activated we will get the payment anyway, but already in 2024, so we will not have advanced SSI benefit.
The rest of the Social Security beneficiaries will get their January benefit as usual, following the usual schedule. Only SSI recipients will have the opportunity to get their check early.