Social Security retirees will get bigger benefit checks next year. That's thanks to the cost-of-living adjustment (COLA) that will be applied. COLAs raise the amount of Social Security benefits to help ensure retirees don't lose ground due to inflation when a consumer price index shows costs of goods and services are going up.
But just how much will your monthly payment increase? Here's what you need to know.
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This is how much your benefits will increase in 2024
In 2024, Social Security recipients will get a 3.2% cost of living adjustment. This means benefits will increase by 3.2%.
You can't necessarily just multiply your current benefit by 3.2%, though. That's because Social Security applies the COLA to something called your primary insurance amount (PIA). Your PIA is the benefit you're entitled to, based on average wages, if you retire at a designated age called your full retirement age (FRA). FRA is based on your birth year.
If you retired right at your FRA, you can determine the value of your COLA by doing simple multiplication, since your monthly benefit will be equal to your PIA. If you were receiving a benefit of $1,500, multiply that by the 3.2% COLA to see that your COLA would be worth $48 per month.
But if you started Social Security early or late, you'd have to apply the COLA to your primary benefit and then calculate the effect of either early filing penalties or delayed retirement credits that applied based on your claiming age.
For example, let's say you claimed benefits two years ahead of your full retirement age. Because of early filing penalties, your PIA would have been reduced by 13.3%. Assuming you had a PIA of $1,500, here's how the calculation would look:
- You would currently be receiving a benefit of $1,300
- Your COLA would be applied to your PIA of $1,500, so it would be worth about $48
- However, early filing penalties of 13.3% would then apply, so the COLA would be worth around $41 (Social Security truncates benefits to the next lower dime).
You'd end up with a new monthly payment of $1,341. That's pretty much the amount you'd end up with if you just multiplied $1,300 times 3.2%. So most people can just multiply 3.2 times their current benefit to get a pretty accurate estimate of what their COLA will add up to in 2024. Still, it's worth noting that this calculation method may be a few dollars off due to the specific formula used.
Don't forget about Medicare premium increases
Once you've figured out how much benefits are going to go up, you also need to take into account rising Medicare premiums and their effect on your benefits increase. Most retirees pay for Medicare directly out of Social Security, so when premiums go up, this reduces the extra income the COLA provides.
In 2024, the standard Medicare premiums for Part B are going up by $9.80 per month. So your COLA will be reduced by this amount if you pay what most seniors do.
Now you know how to calculate how much extra money you'll get in your Social Security check next year. The Social Security Administration will also be sending out notices in December, as well as making them available online, so you will soon get official notification of exactly how your monthly payment will change next year.
