Social Security checks will be 3.2% bigger in 2024, the Social Security Administration announced Thursday. But the program's 2024 cost-of-living adjustment, or COLA, is far short of the inflation-driven 8.7% beneficiaries got in 2023.
In addition to the Social Security COLA news, the Centers for Medicare and Medicaid Services (CMS) announced the monthly Medicare Part A and B premiums for 2024 Thursday. Those premiums will rise by 6% next year.
Some 70 million Americans receive Social Security checks. The 2024 Social Security COLA would boost a retired worker's average monthly benefit by about $58. On average, Social Security retirement benefits for all recipients will increase by more than $50 per month starting in January, the Social Security Administration (SSA) said.
According to an AARP analysis of government data, more than 40% of Americans age 65 and older rely on Social Security for 50% or more of their income. About 20% of recipients in that age group depend on the benefits for 90% or more of their income, the analysis found.
The Social Security COLA, based on inflation, is the "raise" beneficiaries can look forward to next year. Unfortunately, it's not much of a raise this time around. Data released Thursday on the core consumer price index showed price pressures eased slightly in September.
Earlier this year, the Senior Citizens League, a nonpartisan pro-senior think tank based in Alexandria, Va., gave a spot-on estimate of a COLA of 3.2%, based on inflation data.
While a 3.2% COLA is significantly lower than the 8.7% received in 2023 — the highest COLA in more than four decades — it's higher than the average over the past 20 years — which was 2.6%.
Plus, Tweaks To Taxable Earnings Limit
In addition to the Social Security COLA, the SSA made another adjustment that takes effect in January, based on the increase in average wages. Based on that increase, the maximum amount of earnings subject to the Social Security tax will increase to $168,600 from $160,200.
Falling Inflation Nips Social Security COLA
The big decline year-over-year in the Social Security COLA is due to inflation rates falling in 2023 after two years of surging prices.
The inflation rate has slowed. However, older Americans are still strained from two years of historically high consumer prices. Household expenses remain high in essential spending categories, the SCL says. A June survey shows 62% of participants cite food costs as their fastest-growing cost. Housing costs are the biggest concern of 22% of survey respondents.
According to the SCL's latest Retirement Survey, taken last month, 45% of those participating report spending less than $2,000 on monthly expenses in 2023.
How Much Do Retirees Spend Per Month In 2023?
| Monthly spending | % of retirees |
|---|---|
| Less than $1,000 | 8% |
| $1,001-$1,999 | 37% |
| $2,000-$3,999 | 37% |
| $4,000-$5,999 | 11% |
| More than $5,999 | 4% |
| Uncertain | 3% |
Source: The Senior Citizens League Retirement Survey, Sept. 7, 2023; 2,258 responses
According to Labor Department data from Sept. 13, 2023, the annual inflation rate came in at 3.7% for the 12 months ended August. This follows a rise of 3.2% in the previous period.
Retirees may feel the squeeze because the Social Security Administration calculates next year's Social Security COLA using the average of the CPI-W readings for July, August and September.
Since January, the actual inflation rate was lower than the amount Social Security beneficiaries received in their 8.7% COLAs. "That difference theoretically should provide a modest temporary improvement in buying power of roughly $52 per month for a retiree with average benefits of $1,694.00. Inflation, however, was so severe in 2021 and 2022 that the average Social Security benefit fell behind by $1,054, leaving 53% of retirees doubting they will recover because household costs rose more than the dollar amount of their COLAs," the SCL has said.
From Smaller Social Security COLAs to Overpayments
Unfortunately, a smaller Social Security COLA isn't the only thing beneficiaries might have to worry about. In a statement earlier this month, the SSA said it's going to take a closer look at its procedures for clawing back overpayments.
It's not clear exactly how much money in overpayments the agency needs to track down and collect. Social Security pays $1.4 trillion in benefits to more than 71 million people each year. "Only around 0.5% of Social Security payments are overpayments," according to the statement.
"Despite our high accuracy rates, I am putting together a team to review our overpayment policies and procedures to further improve how we serve our customers," said Kilolo Kijakazi, Acting Commissioner of Social Security. Kijakazi took issue with what she called "misinformation in the media claiming that the Social Security Administration is attempting to collect $21 billion." That number, she said, "was derived from the total amount of overpayments that have occurred over the history of the programs."
Social Security recipients who think they have been overpaid can file an appeal or make a request that the Social Security Administration not seek the money back. The agency also said it's working to reduce overpayments in the future and make relief more accessible to overpaid beneficiaries seeking waivers.
Medicare Premiums Will Increase In 2024 As Well
Another increase most Americans 65 and over face each year is the increase in Medicare premiums. Medicare premiums don't rise with the cost of inflation, but they do rise steadily as healthcare costs increase.
The standard monthly premium for Medicare Part B enrollees in 2023 will be $174.70 for 2024, an increase of $9.80 from $164.90 in 2023, CMS announced.
The annual deductible for all Medicare Part B beneficiaries will be $240 in 2024, an increase of $14 from the annual deductible of $226 in 2023, the agency said in a news release.
Medicare Part B covers physicians' services, outpatient hospital services, certain home health services, durable medical equipment, and certain other medical and health services not covered by Medicare Part A.
For those who receive both Social Security and Medicare Part B, the Social Security Administration automatically deducts the Medicare premium from monthly benefits. This leaves many beneficiaries wondering if a hike in Medicare premiums will blunt the benefit of a Social Security COLA.
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The overall benefit (or disadvantage) of the 2024 Social Security COLA depends on the hike in Medicare premiums.
AARP projects that the average monthly premium for Medicare Advantage plans, an alternative to original Medicare, will increase by just 64 cents in 2024.
Hold-Harmless Provision Helps Protects Benefits
Social Security works with the Centers for Medicare and Medicaid Services to prevent a reduction in Social Security benefits as a result of Medicare Part B premium increases. The "hold harmless provision" protects Social Security benefit payments from decreasing due to an increase in the Medicare Part B premium for most beneficiaries.
Generally, to qualify for the hold harmless provision, recipients must receive Social Security benefits or be eligible for Social Security benefits for November and December of the current year. They must also have Medicare Part B premiums for December and January deducted from monthly benefits.
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