The Social Security Administration just announced a 3.2% cost-of-living adjustment (COLA) for 2024. That's a lot less than the 8.7% increase seniors saw last year, but it will still give your checks a small boost. However, calculating your 2024 benefit isn't as simple as adding an extra 3.2%.
Below, we'll look at how the government calculates your checks and how it applies COLAs to your benefit.
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How the government calculates your Social Security benefit
The first thing the Social Security Administration does when calculating your benefit is determine your primary insurance amount (PIA). It takes your average monthly income over your 35 highest-earning years, adjusted for inflation, and plugs it into the Social Security benefits formula.
The resulting PIA is the benefit you qualify for at your full retirement age (FRA), somewhere between 66 and 67, depending on your birth year. But many people don't claim then. Many sign up earlier and some people delay benefits past their FRA.
In these cases, the Social Security Administration runs an additional calculation that adjusts benefits up or down based on your age at signup. For those claiming early, your checks shrink by:
- 5/9 of 1% per month you claim under your FRA, up to 36 months
- 5/12 of 1% per month for any additional months of early claiming
Long story short, if your FRA is 66 and you claim right away at 62, you only get 75% of your PIA per check. Those with an FRA of 67 get 70% of their PIA per check when they apply right away.
If you delay benefits beyond your FRA, your checks grow by 2/3 of 1% per month until you reach 70. At that point, you qualify for your maximum benefit of 124% of your PIA if your FRA is 67, or 132% if your FRA is 66.
How the government applies COLAs to your benefit
When calculating your new benefit after a COLA, it's only as simple as adding 3.2% if you signed up right at your FRA. If not, you need to apply the COLA to your PIA first and then make the appropriate adjustments for your claiming age.
Let's say you applied for Social Security in 2023 at your FRA of 67 and qualified for the average $1,840 check. The government wouldn't make any adjustments for your claiming age when calculating your new benefit, so your 2024 checks would rise by 3.2%, or about $59 per month.
But now let's imagine you had a PIA of $1,840 but chose to sign up at 62 instead of at your FRA of 67. In this case, your 2023 benefit would be $1,288 per month. Adding 3.2% to this would give you $1,329 per month, but that's not how the government does the math.
Instead, you'd have to add the 3.2% to your PIA -- in our example, that's $1,840. That would bring you to about $1,899. Then, you'd have to apply a benefit reduction of 30% to this amount since you originally claimed Social Security at 62. In this case, that also gives you a result of $1,329 per month.
For most people, adding 3.2% to your current Social Security checks will probably give you a good ballpark of what to expect in 2024. But it's possible that calculating it this way could leave you a few dollars off the mark.
How to find out what your official 2024 COLA will be
The Social Security Administration will mail COLA notices to all recipients in December. This will tell you exactly how much your checks will increase beginning in January so you know what to expect. But you may be able to find this out sooner if you have a my Social Security account.
This account enables you to view the details of your Social Security benefit and do things like request replacement cards. You can also view your COLA notice as soon as it becomes available in early December. However, you must create your account by Nov. 14, 2023, if you hope to receive your COLA notice this way instead of by mail.
If you have any questions about your Social Security COLA, you can reach out to the Social Security Administration for further information. However, it's best to wait until the notices go out in December if you have questions about your specific benefit.
