More than 66 million Americans received a Social Security benefit in July, and the average payout was $1,703.98. But the program provides monthly income to four broad groups of beneficiaries, and the average payout varies widely among them.
Discrepancies notwithstanding, I'm willing to bet members of each group are wondering the same thing: How much will payouts increase after the 2024 cost-of-living adjustment (COLA) is applied to Social Security benefits?
Here are the important details.
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The average Social Security benefit in July
The program provides income to four broad groups of beneficiaries: retired workers, disabled workers, spouses, and survivors. Retired-worker benefits and disabled-worker benefits are based in large part on lifetime earnings, while spousal benefits and survivors benefits are tied to the earnings of a specific worker who is retired, disabled, or deceased.
Listed below are the average monthly benefits payable to the four major groups of Social Security beneficiaries in July 2023:
- Retired workers: $1,838.58
- Spouses: $891.32
- Survivors: $1,454.08
- Disabled workers: $1,349.44
Social Security benefits get an annual cost-of-living adjustment (COLA)
The Social Security program undergoes several changes each year, but one of the most highly anticipated changes is the annual COLA. Inflation slowly erodes the purchasing power of money, but annual COLAs counteract inflation to try to help beneficiaries keep up with rising prices across the economy. In other words, COLAs increase benefit payments in nominal dollars to try to keep purchasing power constant over time.
The COLA calculation is based the Consumer Price Index for Urban Wage Earners and Clerical Workers, abbreviated as CPI-W, which measures how prices change over time from the perspective of hourly wage earners and office workers. Specifically, the third quarter CPI-W from the present year (i.e., July through September) is compared to the third-quarter CPI-W from the previous year, and any percentage increase becomes the COLA in the subsequent year.
For instance, the third-quarter CPI-W increased 8.7% year over year in 2022, so Social Security benefits got an unusually large COLA of 8.7% in 2023. In fact, that was the largest raise for beneficiaries since 1982 and the fourth-largest raise in program history.
Experts say Social Security benefits are on pace for a 3% COLA in 2024
Social Security's official 2024 COLA cannot be calculated until Oct. 12 at 8:30 a.m. ET, the date and time when the Labor Department is scheduled to publish September inflation data, including the latest CPI-W reading. But several policy experts have already made educated guesses, and the consensus is this: Benefits will probably get a 3% COLA in 2024.
Let me be clear: That figure is an estimate. The actual COLA depends on the trajectory inflation follows in August and September. But if Social Security benefits do indeed increase 3% next year, here is how the average monthly payout would change across the four major beneficiary groups:
- Retired workers: $1,893.74 (an extra $55.16)
- Spouses: $918.06 (an extra $26.74)
- Survivors: $1,497.70 (an extra $43.62)
- Disabled workers: $1,389.92 (an extra $40.48)
Readers might find those numbers disappointing, especially after receiving a much larger cost-of-living increase this year. But there is a silver lining: The large COLA in 2023 came at a heavy price. Scorching inflation and its impact on monetary policy sent the stock market into a tailspin, wiping away trillions of dollars in retirement savings at one point.
A smaller COLA in 2024 means inflation is cooling. That trend has already breathed new life into the stock market, and retirement-account balances could rebound further as the economy continues to improve.
