The Social Security Administration (SSA) announced on Thursday that Social Security benefits will increase by 3.2% in 2024, a smaller cost-of-living adjustment (COLA) compared to 2023’s 8.7% bump.
The 2024 COLA will provide some relief for the nearly 70 million Americans receiving Social Security benefits, helping them keep up with rising prices.
What Does a 3.2% COLA Mean in Dollar Terms?
While 3.2% may seem small compared to 2023’s COLA, it will still equate to a noticeable increase in monthly checks for most. The average monthly retirement benefit currently stands at $1,840. With a 3.2% increase, the new average will be around $1,899 per month, a boost of $59.
Spousal benefits will also rise by $28 to $918 on average. Benefits for children of retired workers will go up by $28 as well, to $887 per month. Across all categories of Social Security benefits, recipients will see an increase of between $28 to $59 per month.
“A $59 per month increase may not seem like much at first glance,” said William Smith, policy analyst at the Center on Budget and Policy Priorities. “But for the millions relying on fixed Social Security income, that extra $59 per month will help them afford groceries, medications, utilities, and other essentials.”
Survivor Benefits See Similar Increases
In addition to retirement benefits, Social Security provides essential income to 6.1 million survivors of deceased workers. These survivor benefits will also rise by 3.2% under the 2024 COLA.
For example, the average benefit for children of deceased workers currently stands at $1,067 per month. With the COLA, this will increase to $1,101. Widowed mothers and fathers receive about $1,241 per month on average today. In 2024, that average will climb to $1,281 after the adjustment.
Across all survivor benefit categories, recipients will see an extra $28 to $55 per month after the COLA takes effect.
Millions of Disabled Americans Will See A Boost
Another vital support that Social Security provides is disability benefits. Over 9 million disabled workers currently receive an average of $1,487 per month in benefits. The upcoming COLA will push that figure to $1,534 per month, adding $47 more.
Spouses caring for disabled family members also receive assistance, with the average benefit currently at $408 monthly. This will rise to $421 after the COLA. Finally, children of disabled workers get $472 on average now, which will become $487 thanks to the increase.
“The 2024 COLA for Social Security ensures that millions of retirees, disabled individuals, and survivors do not lose ground due to inflation next year,” said Nancy Altman, President of Social Security Works. “While it is lower than 2023’s COLA, an extra $59 per month will help beneficiaries keep food on the table and meet healthcare needs.”
COLA Formula Based on CPI-W Index
The COLA amount each year depends on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) as calculated by the Bureau of Labor Statistics (BLS). When the CPI-W shows inflation, Social Security benefits are increased accordingly to retain purchase power.
However, critics argue the CPI-W does not reflect the actual spending patterns of elderly and disabled Americans. For example, it places more weight on gasoline prices than medical costs, which are a larger concern for those relying on Social Security. There have been proposals in Congress to switch to a different index, called the CPI-E, that is geared toward seniors specifically.
“The CPI-W used to calculate the COLA underweights key expenses for Social Security beneficiaries, resulting in smaller adjustments,” explained Max Richtman, President of the National Committee to Preserve Social Security and Medicare. “Adopting a new index like the CPI-E would lead to COLAs that better keep pace with rising costs.”
2024 COLA Lower Than 2023 Due to Slowing Inflation
Much of the reason that next year’s COLA will be smaller is that overall inflation has cooled somewhat in recent months after hitting 40-year highs earlier in 2022. As inflation slowed through 2022 and into 2023, it brought down the CPI-W increase for the COLA calculation period.
“High inflation delivered a historically large COLA of 8.7% for 2023 benefits,” said Richtman. “Fortunately, inflation has eased since mid-2022, and is reflected in a lower but still significant 3.2% COLA for next year.”
While lower than 2023’s COLA, a 3.2% boost is still higher than pre-pandemic levels. COLAs averaged just 1.7% in the decade prior to 2022. The 2022 COLA itself was 5.9% due to a post-pandemic surge in prices that year.
Social Security’s Finances Remain Precarious
At the same time the 2024 COLA was announced, the SSA also released its annual report detailing the program’s finances. The report reaffirmed that Social Security’s combined trust funds will be able to pay scheduled benefits in full until 2035.
Starting in 2035, payroll taxes are projected to cover only about 80% of scheduled benefits if Congress does not act. Advocates argue shoring up Social Security’s finances should be done by making the wealthy pay their fair share into the system, not by cutting benefits.
“While today’s COLA announcement is good news, we cannot ignore the larger issue that Social Security faces a funding shortfall in its near future if Congress does not take action,” said Altman. “The solution must not cut benefits but rather ensure millionaires and billionaires pay into Social Security like the rest of us.”
In summary, the official COLA announcement delivered mildly positive news for seniors, disabled individuals, survivors and others relying on Social Security. The 3.2% boost will help the most vulnerable Americans meet rising costs in 2024. However, more action is still needed to secure Social Security’s long-term finances while avoiding benefit cuts down the road.