In 2023, the average retiree received a monthly benefit of $1,847 from the Social Security Administration. In 2024, the average monthly retirement income for the typical retiree is going up to $1,906.
Why did benefits increase, and what does this mean for retirees? Here's what you need to know.
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This is why benefits increased in 2024
Benefits went up for retirees in 2024 for a simple reason. Retirees got a cost-of-living adjustment (COLA).
COLAs are built into the Social Security benefits program. They have to be, because otherwise benefits would stay stagnant and seniors would lose considerable buying power. Someone who retires and lives for 30 years would not have nearly enough retirement income if their benefits never changed over that time, because inflation would lead to price increases and their money would buy less and less each year.
To make sure that retirees don't see inflation eat away at the real value of their Social Security checks, the program provides automatic raises when a consumer price index shows that prices are rising.
The Social Security Administration looks at data from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The third-quarter data is reviewed to see if the price index shows that costs have gone up on a basket of goods and services.
If the CPI-W does show higher prices year over year, seniors get a cost-of-living adjustment based on that increase. Since the Q3 data from 2023 showed prices were up 3.2% from the prior year, retirees got a 3.2% raise.
This was a much smaller raise than retirees got in the prior year because inflation was surging at the time. Retirees got an 8.7% raise that went into effect in 2023, and a 5.9% raise the year before that.
With such a small raise taking effect this year, though, the average American saw their monthly Social Security check increase by only $59 -- from $1,847 to $1,906 -- at the start of 2024.
How does the COLA affect your Social Security income?
When you get a cost-of-living adjustment, you will apply the COLA to your own benefit amount. This will help you determine how much bigger your benefit is going to be. If you're getting your standard benefit, which was equal to $1,800, and you get a 3.2% raise, you'd find yourself with a benefits bump of $57.60 per month (3.2% of $1,800).
You do need to take Medicare premiums into account, though, as these are often withdrawn directly from your Social Security check. Premiums for Medicare Part B went up $9.80 per month, so this would come off the extra money you're getting in your check.
It's important to remember that while this may feel like extra money, you're actually getting it because economic data has shown prices are up. Your raise won't really give you more buying power -- it will just help you to stay even and keep purchasing the things you were already purchasing, but at their new higher prices. So, despite your COLA, keep living on your budget to make sure you make the most out of the Social Security checks coming in.
