Important Update: Key Details on Social Security Payments
The Social Security Administration made an exciting announcement this week, revealing that the 2024 cost-of-living adjustment (COLA) for payments will be 3.2 percent. While this increase is lower than last year’s 8.7 percent, it still exceeds the average over the past 20 years. This adjustment applies to individuals receiving retirement or disability benefits and is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) in July, August, and September. The Social Security program plays a crucial role in providing financial support to millions of Americans, including low-income individuals with disabilities.
The Social Security Administration pays out approximately $1.4 trillion in benefits each year to over 71 million people. These benefits are funded by taxes from working individuals and are distributed to retirees, disabled individuals, survivors of deceased workers, and dependents of beneficiaries. The 2024 COLA increase was determined based on cooling inflation, as cited by the Social Security Administration.
Why?
The annual Social Security payment adjustment is calculated using the CPI-W for July, August, and September. According to the Bureau of Labor Statistics (BLS), the CPI index remained at 3.7 percent last month, with the index for urban wage earners at 3.6 percent.
“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,” explained Mark Hamrick, senior economic analyst at Bankrate. “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 may seem smaller than last year’s increase, it is actually higher than the average over the past five years. According to Mary Johnson, a policy analyst at the Senior Citizens League, the annual percentage increases for 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.
When Does It Start?
The adjusted payments will begin in January 2024, as outlined in the Social Security Administration’s payment schedule for next year.
How Much?
The COLA is intended to help offset the rising prices of essential goods and services such as food and fuel. On average, recipients can expect an increase of about $54 per month, according to government estimates.
In August, the average monthly payment for Social Security beneficiaries was $1,705.79. With a 3.2 percent COLA, this would mean an additional $54.58 per month for each recipient.
However, Mary Johnson cautioned that this increase may not be enough to cover rising expenses, stating, “That’s maybe not going to cover a rent increase.”
Social Security is funded through payroll taxes collected from workers and their employers. The maximum amount of earnings subject to Social Security payroll taxes for 2023 is $160,200.
Martha Shedden, president of the National Association of Registered Social Security Analysts, acknowledged that the 3.2 percent increase may feel small compared to last year’s 8.7 percent. She emphasized that retirees are still facing inflation and higher costs.
Medicare?
In addition to the Social Security COLA, the Centers for Medicare and Medicaid Services announced an increase in the standard Medicare Part B premium. Most beneficiaries will see their premium rise from $164.90 in 2023 to $174.70 in 2024.
Kathleen Romig, director of Social Security and Disability Policy at the Center on Budget and Policy Priorities, noted that the increased Medicare premiums will consume a significant portion of the COLA for many individuals.
Too Little?
Despite the 8.7 percent increase last year, many seniors have reported falling behind. The rising costs of living, particularly in healthcare, have outpaced the COLA. Older adults spend a higher percentage of their income on healthcare compared to the CPI-W assumption used in the COLA calculation.
The AARP has called on Congress to address the long-term sustainability of the Social Security program, as concerns arise about its future financial stability.
AARP CEO Jo Ann Jenkins stated, “Americans work hard to earn their Social Security, and it’s only fair for them to get the money they deserve.”
Will the COLA adjustment be enough to fully address the financial challenges that seniors are facing in relation to healthcare, housing, and other essential expenses
Enough to offset the erosion in the buying power of Social Security benefits that has occurred over the past decade or longer.” She added that seniors are facing increasing costs in healthcare, housing, and other essential expenses, and that the COLA adjustment may not fully address these financial challenges.
Impact on Social Security Recipients
The COLA increase can have a significant impact on the lives of Social Security recipients. For many individuals, especially those with limited
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