When it comes to income in retirement, tens of millions of Americans rely primarily on Social Security to help them make ends meet. Those who qualify count on receiving monthly checks from the program.
One of the best features of Social Security is that monthly benefits are adjusted for inflation each year. These cost-of-living adjustments, or COLAs, take effect each January. But the numbers that determine the final COLA amount come out each October. The government just released the final numbers necessary to make the calculation, and Social Security recipients can expect a 3.2% raise come the beginning of 2024. That's not as much as the 8.7% they got in the COLA that took effect in January 2023, but it'll still be useful to help cope with rising prices.
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What went into the 3.2% COLA calculation
Those on Social Security get a lot of advance notice on what their New Year's raise will be because of the methodology that the Social Security Administration (SSA) uses in order to calculate the COLA. The SSA looks at the monthly data prepared by the Bureau of Labor Statistics on inflation, specifically looking at a particular index known as the CPI-W index. It takes the CPI-W figures for the three summer months of July, August, and September, and then averages them together. The agency then takes the corresponding figures for July through September of the previous year and looks at the percentage change. That change gets rounded to the nearest tenth of a percent and becomes the COLA for the following year.
In 2022, the three monthly figures for the inflation gauge were 292.219, 291.629, and 291.854, for an average of 291.901. Before this morning, the CPI-W figures for July and August 2023 were 299.899 and 301.551. With the just-released figure of 302.257 for September 2023, that brings the 2023 average to 301.236. That's an increase of 3.2%, and so that's what the COLA will be for 2024.
That percentage will get applied to whatever your monthly check happens to be. Therefore, the bigger the dollar amount is, the more in extra cash you'll get every month starting in January.
How much to expect
The SSA does provide some average figure for various benefit recipients, though. That should give a sense of how much extra money to expect in Social Security checks each month.
As of August 2023, the typical retired worker received an average benefit of $1,840 per month. Taking 3.2% of that figure yields about $59, and so that's roughly the monthly increase that the average retired worker can expect come January.
Those who claim benefits based on another person's work record can expect a bit less of an increase on average. The typical spousal benefit in August 2023 was $890 per month, and so the COLA will represent a bump of about $28.50. Meanwhile, those receiving survivor benefits on average get $1,454 per month, so the COLA should raise that by roughly $46.50.
Bear in mind, though, that you might not actually take home that entire increase. That's because most people have Medicare Part B premiums taken directly out of their Social Security checks, and those premiums are expected to rise in 2024. In particular, the base Part B medical insurance premium is projected to rise by about $10 per month, so you'll need to account for that extra cost when planning on what Social Security will pay.
Less, but still helpful
Some Social Security recipients will be disappointed not to see a rise as big as the 8.7% COLA that took effect at the beginning of 2023. However, every little bit helps, and the 2024 COLA of 3.2% will put at least some extra money in the pockets of most of those on Social Security.
