Social Security recipients will receive a 3.2% raise for 2024, an above-average adjustment that may still prove no match for sticky inflation.
On Thursday morning, the Social Security Administration announced how much checks will rise next year for the nation’s roughly 67 million Social Security recipients, including some 52 million claiming retirement benefits. The annual cost-of-living adjustment is based on the difference between the average inflation for the third quarter of the current year and the average inflation for the same period the prior year.
The 3.2% COLA will be much less than this year’s historic 8.7% raise but still greater than the average over the past 20 years, which is 2.6%, according to Mary Johnson, Social Security and Medicare policy analyst at the Senior Citizens League.
A 3.2% raise will add an extra $57 to an average monthly retiree benefit of $1,790, Johnson says. “That’s maybe not going to cover a rent increase,” Johnson says.
Housing costs have seen some of the biggest increases over the past 12 months. Shelter costs were up 7.2% in the 12 months ending in September, according to the Bureau of Labor Statistics, and food costs were up 3.7%. In a recent poll by the Senior Citizens League, just over two-thirds of respondents reported that their household expenses remain at least 10% higher than one year ago.
An expected increase to Medicare Part B premiums will eat into the modest Social Security raise. Part B premiums are automatically subtracted from most beneficiaries’ Social Security checks. The Centers for Medicare and Medicaid Services is expected to announce the Part B premium for 2024 later this fall. The Senior Citizens League projects that the standard Part B premium could rise to about $179.80 a month for 2024, up from this year’s $164.90.
Taxes could further erode some retirees’ benefits. You will pay federal income taxes on a portion of your benefits if your combined income is more than $25,000 as an individual and more than $32,000 as a couple filing a joint tax return. These dollar thresholds haven’t been adjusted for inflation since they were first implemented in 1984.
Last year, many people paid taxes for the first time on some of their benefits. In the Senior Citizens League poll, as many as 26% of respondents who had been receiving Social Security for more than three years reported paying taxes on a portion of their benefits for the first time on their 2022 tax return. This year’s outsize COLA could bump even more beneficiaries into taxable territory for 2023.
As long as you’re at least 62, you don’t need to be receiving Social Security to benefit from the annual COLA. That’s because, starting the year you turn 62, the COLA is applied to your Primary Insurance Amount (PIA), the amount you would receive if you claim at your full retirement age, which is 67 for those born in 1960 or later. In other words, there’s no need to claim earlier than you would otherwise to collect a bigger-than-average raise.
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