Social Security recipients across the country will start to see bigger payments hitting their bank accounts this month. The Social Security Administration (SSA) recently announced the new cost-of-living adjustment (COLA) for 2024, which represents the largest increase in benefits in over 40 years.
COLA Increase Set at 8.7% for 2024
The SSA bases the COLA increase on inflation figures tracked by the Bureau of Labor Statistics’ Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). For September 2023, the CPI-W noted an 8.7% increase over the previous year. Thus, Social Security benefits in 2024 will see an 8.7% boost.
This increase dwarfs the 2023 COLA adjustment of only 3.9%. It is also the largest year-over-year hike since 1981. The higher benefits aim to help seniors and other beneficiaries keep pace with rapidly rising prices for gas, food, housing, and healthcare.
Average Benefits Jumping by More Than $150 Per Month
For the average Social Security recipient, the 8.7% COLA translates to an additional $146 received every month. Retirees currently getting $1,669 a month will now collect around $1,815 monthly. The rise means nearly $1,750 more that the average beneficiary will have to spend next year.
The increased payments kicked in starting January 2024. So recipients will get their first higher check on January 3rd.
Beneficiaries include more than 65 million Americans. Almost half of elderly married couples and 70% of unmarried seniors rely on the program for at least half their income. For around 1 in 4 seniors, Social Security constitutes nearly all of their earnings.
Maximum Monthly Payment Hits $4,555
In addition to the percentage hike, the SSA also increased the maximum monthly payment for individuals. After climbing by $73 to $3,895 last year, the highest possible 2024 benefit now sits at a lofty $4,555 per month. That works out to $54,660 for the full year.
However, only the top 6% of earners end up receiving the maximum amount. To qualify in 2024, workers would have had to earn $160,200 or above for at least 35 years over their working lifetimes.
For the other 94% of retirees, payouts depend directly on lifetime wages. Each year of work counts toward the total benefits ultimately received. The SSA calculates payments based on a complex formula taking into account at least 35 years of earnings. Typically, those highest-earning years before retirement determine the final monthly amounts.
Wide-Reaching Impacts Across American Society
Over 1 in 6 Americans currently receive income from Social Security. Beyond retirees, the program also supports millions of disabled workers and families of deceased workers. So strengthening the vital social net through higher COLAs broadly impacts households nationwide.
In particular, the substantial 2024 hike stands to benefit disadvantaged groups the most. An estimated 22 million lift themselves out of poverty thanks to Social Security payments. And 25% of elderly minorities count solely on their monthly benefits to make ends meet.
At the community level, increasing the buying power of vulnerable seniors positively affects local businesses. Because low-income beneficiaries spend their Social Security income immediately on essential needs, that money goes directly to pharmacies, grocery stores, landlords, healthcare providers and home care services in their neighborhoods.
Building on Other Positive Developments
This year’s momentous COLA uptick caps several other milestones for Social Security over the past year.
In October 2023, beneficiaries welcomed an extra check equal to their normal payment as part of an initiative to make up for 2022’s anemic COLA. Though prices rose significantly last year, the corresponding benefits increase stayed unusually low due to anomalous inflation calculations during the pandemic.
The one-time additional disbursement helped the 70 million Americans receiving Social Security recover some losses from 2022’s unchecked inflation.
Other positive news comes from the annual Social Security and Medicare Trustees report. Released in June 2023, the analysis pushed back estimates for depletion of Social Security reserves. Should no changes occur, the program can now pay all benefits through 2038 instead of the previously projected 2035.
What Comes Next?
Going forward into 2024, seniors and advocates eagerly anticipate further enhancements to Social Security under the Biden administration. At the federal level, White House officials continue lobbying for reforms and investments to strengthen Social Security over the long run.
Ideas on the table include increasing payroll taxes on higher earners to boost funding, pegging COLA calculations to inflation costs actually faced by seniors, and setting a minimum benefit level to reduce old-age poverty.
With Democrats controlling both houses of Congress, observers remain hopeful that impactful legislation around Social Security gets introduced and passed in 2024. Combined with this month’s massive COLA increase, the new year shapes up to be one of tangible gains for America’s retirees.
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