Social Security Announces 3.2 Percent COLA Increase for 2024

Social Security recipients will receive a 3.2 percent increase in their benefits next year.
Social Security Announces 3.2 Percent COLA Increase for 2024
A Social Security card sits alongside checks from the U.S. Treasury in Washington on Oct. 14, 2021. (Kevin Dietsch/Getty Images)
Andrew Moran
10/12/2023
Updated:
1/5/2024
0:00

More than 71 million retirees will receive a more than 3 percent increase in 2024 in their Social Security and Supplemental Security Income (SSI) payments, the federal agency confirmed after the latest Consumer Price Index (CPI) was released.

According to the Social Security Administration (SSA), more than 66 million Social Security beneficiaries will be given a 3.2 cost-of-living adjustment (COLA) starting in January 2024, meaning that the average check will increase by $58.

Roughly 7.5 million SSI beneficiaries will see their COLA on Dec. 29, 2023. Some people receive both Social Security and SSI benefits.

“Social Security and SSI benefits will increase in 2024, and this will help millions of people keep up with expenses,” Kilolo Kijakazi, acting commissioner of Social Security, said in a statement.

In September, The Senior Citizens League (TSCL) projected that the Social Security COLA would come in at 3.2 percent. In August, the AARP estimated that it would be about 3 percent.

With inflation soaring to its highest level in 40 years, Social Security recipients were given unusually high adjustments of 5.9 percent in 2021 and 8.7 percent in 2022. Unless there’s another exceptional reacceleration of inflation, economists agree that the more than 71 million Americans receiving retirement and disability benefits are unlikely to witness similar adjustments in the near future.

The COLA Debate

COLA uses the third-quarter CPI for urban wage and clerical workers—also known as the CPI-W—compared with the same period a year ago.

In recent years, some advocates have argued that the Labor Department needs to consider using the experimental CPI-Elderly. This measures the inflation rate for individuals older than 62 and reflects the typical spending of older adults, emphasizing medical costs over transportation expenses.

Advocates contend that “nobody is getting rich” off of Social Security, with TSCL calling the COLA raises “meager at best.”

The average monthly retiree benefit was $1,790 in 2023. The group’s recent Retirement Survey found that 45 percent of participants reported spending less than $2,000 on expenses this year.

Still, the AARP welcomed the retirement benefit boost.

“Older Americans are still feeling the sting when they buy groceries and gas, making every dollar important,” the nonprofit, nonpartisan senior advocacy organization wrote on X, formerly known as Twitter. “Retirees can rest a little easier at night knowing they'll soon receive an increase in their Social Security checks to help them keep up with rising prices.”

In September, the annual inflation rate was unchanged at 3.7 percent, although prices rose by 0.4 percent month over month. Moreover, the Producer Price Index (PPI), a pre-indicator for consumer inflation, saw a 2.2 percent increase in September, sparking concerns that there could be a reacceleration of inflation heading into 2024.

Meanwhile, the inflation adjustment is also used to determine the wage cutoff above which Americans don’t owe the Social Security tax. The previous threshold was a little more than $160,000, and now it will be $168,800.

Struggling to Stay Afloat

Both U.S. seniors and the Social Security fund are struggling to stay afloat.

A recent Census Bureau analysis found that nearly 30 percent of Americans ages 65 years and older say it’s challenging to pay their expenses, up by 7 percent from the previous year.

Earlier this year, the Social Security and Medicare boards of trustees warned that these federal programs will run out of cash in the next decade. The projections show that the Social Security trust fund will be exhausted by 2033, while Medicare will run short of cash to pay benefits by 2031.

Treasury Secretary Janet Yellen, who heads the trustees, emphasized the importance of supporting both trust funds to prevent enormous cuts in benefits.

“Social Security and Medicare are two bedrock programs that older Americans rely upon for their retirement security,” Ms. Yellen said in a March statement. “The Biden-Harris administration is committed to ensuring the long-term viability of these critical programs so that retirees can receive the hard-earned benefits they’re owed.”

In the fiscal year to date, the U.S. government has spent $1.238 trillion on Social Security and $730 billion on Medicare, according to a recent monthly Treasury statement. Part of the reason for the significant jump in spending has been because of inflation.

Economists have noted that there are many different approaches that public policymakers could take to ensure the survival of these retirement programs.

Les Rubin, an economist and Main Street Economics founder, asserts the government could change the eligibility age, change the contribution gap, and a whole host of other measures “to prolong the longevity.”

But while some experts contend that not doing anything will eventually result in double-digit cuts to benefits, Mr. Rubin told The Epoch Times that he doesn’t believe “we'll ever get to that point.”

“I believe they'll fix something before we get to these horrible things happening,” he said, adding that lawmakers will need to fix the problem of nondiscretionary spending.

Andrew Moran has been writing about business, economics, and finance for more than a decade. He is the author of "The War on Cash."