Here's the Average Social Security Benefit in 2024 After the 3.2% Cost-of-Living Adjustment (COLA)

The Social Security Administration issued a press release on Thursday, Oct. 12, explaining that beneficiaries will get a 3.2% cost-of-living adjustment (COLA) next year. That means the average Social Security benefit will increase from $1,705.79 in August 2023 to $1,760.30 in January 2024, representing an extra $54.51 per month for the average recipient.

However, the Social Security program provides monthly income to several different types of beneficiaries, and the average payout varies widely across those groups. Read on to learn how each group will be impacted by the 3.2% COLA, and how individual recipients can estimate their new Social Security benefit amount for 2024.

Social Security benefits will get a 3.2% cost-of-living adjustment (COLA) in 2024

Social Security's annual COLA is calculated based on changes in third-quarter inflation. The metric used to measure inflation is the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which tracks price changes across more than 200 spending categories.

Specifically, the average CPI-W from Q3 of the current year (i.e., July through September) is divided by the average CPI-W from Q3 of the prior year, and the percent increase becomes the COLA for the following year.

The chart below provides details on the 2024 COLA calculation:

Data source: Social Security Administration.

As shown above, the average CPI-W in Q3 2023 was 301.236, which is 3.2% higher than the average CPI-W in Q3 2022. That means Social Security benefits will get a 3.2% COLA in 2024.

Some readers may be disappointed with that figure given that Social Security benefits received unusually large COLAs of 5.9% and 8.7% in the last two years. But the 2024 COLA of 3.2% is still above the 10-year average of 2.8%, and it still ranks as the third-largest raise for Social Security recipients in the last decade, as shown in the chart below:

Chart by Author.

What Social Security's 3.2% Cost-of-Living Adjustment (COLA) means for benefits

As mentioned, the average Social Security benefit was $1,705.79 in August 2023. That figure will increase 3.2% to $1,760.30 in January 2024. But the Social Security program provides income to several groups of beneficiaries, including retired workers, spouses of retired workers, survivors, and disabled workers.

Detailed in the chart below is the average Social Security benefit paid to each of those four groups in August 2023, and how that figure will change once the 3.2% COLA is applied in January 2024.

Data source: Social Security Administration.

Social Security recipients will receive a COLA notice by mail in December detailing their updated benefit amount for 2024. The same information will also appear in the message center of their my Social Security account. In the meantime, readers can estimate their updated Social Security benefit amount for 2024 by following these steps:

• Step 1: Medicare Part B premiums are deducted directly from Social Security checks, so Medicare beneficiaries must first add that amount back to their most recent Social Security payment. For context, the standard Part B premium is $164.90 per month in 2023.
• Step 2: Multiply the figure from step 1 by 1.032 and round down to the next lowest dime.
• Step 3: Medicare Part B premiums have yet to be updated, but the trustees expect the standard monthly premium to be $174.80 next year. Accordingly, Social Security recipients can subtract $174.80 from the figure in step 2 to estimate their new benefit amount for 2024.

In closing, readers should remember that Social Security's annual COLAs are not truly raises. They are better viewed as backpay for the buying power benefits lost to inflation in the previous year. Unfortunately, after steadily falling for a year, CPI-W inflation has now trended higher for three consecutive months. If that pattern continues, rising prices could consume the entire 2024 COLA (and then some). For that reason, Social Security beneficiaries should budget their money conservatively.