The Cost-of-Living Adjustment (COLA) is an essential component in ensuring that Social Security and Supplemental Security Income (SSI) benefits keep pace with the rising cost of living. In 2024, more than 71 million Americans will experience a 3.2% increase in their benefits, providing much-needed relief. This article will delve into the details of the COLA increase for 2024, including how it is calculated, its historical significance, and the impact it will have on individuals' financial well-being.

What is a COLA and How is it Calculated?

A COLA, or Cost-of-Living Adjustment, is an annual increase in Social Security and SSI benefits that helps beneficiaries maintain their purchasing power amidst inflation. The calculation of the COLA is based on the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of the previous year to the third quarter of the current year. If there is no increase or the rounded increase is zero, no COLA is granted.

For 2024, the COLA has been determined to be 3.2%. This means that Social Security retirement benefits and SSI payments will see a significant boost, providing individuals with additional financial support to meet their daily needs.

Historical Significance of COLAs

The history of COLAs dates back to the 1972 Social Security Amendments when Congress enacted legislation to ensure regular increases in benefits. Prior to 1975, benefits were only increased when Congress passed special legislation. However, since 1975, automatic annual COLAs have been in effect, tying benefit increases to the annual rise in the CPI-W. This change has protected beneficiaries from the erosion of their purchasing power due to inflation.

Over the years, COLAs have varied based on economic conditions and the CPI-W. From the initial 8.0% increase in 1975 to the 3.2% increase in 2024, these adjustments have played a vital role in supporting individuals and families who rely on Social Security and SSI benefits.

How the COLA Increase Impacts Social Security and SSI Benefits

The 3.2% COLA increase for 2024 will have a tangible impact on the monthly benefits received by Social Security and SSI beneficiaries. On average, Social Security retirement benefits will rise by over $50 per month, providing individuals with additional income to cover essential expenses. The increase will be reflected in the benefits payable starting in January 2024 for Social Security beneficiaries and from December 29, 2023, for SSI recipients.

To understand the specific changes, let's explore the key areas affected by the COLA increase:

1. Social Security Taxable Maximum

The maximum amount of earnings subject to the Social Security tax, also known as the taxable maximum, will increase to $168,600 in 2024. This means that individuals earning above this threshold will only pay Social Security taxes on the first $168,600 of their income.

2. Earnings Limit for Workers Below Full Retirement Age

For workers who have not yet reached their "full" retirement age, there are earnings limits in place that can affect their benefits. In 2024, the earnings limit will be $22,320, meaning that for every $2 earned over this amount, $1 will be deducted from their benefits.

3. Earnings Limit for Workers Reaching Full Retirement Age

Individuals who reach their "full" retirement age in 2024 will have a higher earnings limit. The limit will be $59,520, and for every $3 earned above this amount until the month they reach full retirement age, $1 will be deducted from their benefits. However, once individuals reach their full retirement age, there is no limit on earnings, and benefits will not be reduced.

4. Medicare Changes

Information regarding Medicare changes for 2024 will be available on the official Medicare website, www.medicare.gov. Social Security beneficiaries who receive Medicare coverage will receive their new 2024 benefit amount through the mailed COLA notice or the Message Center in their my Social Security account.

How to Access Your COLA Notice

To ensure that beneficiaries receive timely information about their new benefit amounts, the Social Security Administration will send COLA notices throughout December to retirement, survivors, and disability beneficiaries, SSI recipients, and representative payees. However, for those who prefer to access the information sooner, they can securely obtain their COLA notice online through the Message Center in their personal my Social Security account. By logging in to their account, individuals can view their COLA notice and even opt-out of receiving the mailed notice.

It's important to note that benefit amounts will not be available before December, and individuals should not contact the Social Security Administration to inquire about their new benefit amount. Instead, they can choose to receive courtesy notifications via email or text when there is a new message waiting for them in their Message Center.

Protecting Yourself from Fraudulent Calls and Schemes

The Social Security Administration emphasizes that its services are free of charge, and no reputable company or government agency will solicit personal information or request advanced fees for services. To protect yourself from fraudulent calls and internet phishing schemes, it is crucial not to reveal personal information, select malicious links, or open suspicious attachments.

For more information on how the Social Security Administration safeguards personal information and protects my Social Security accounts, visit their official website.

Conclusion

The 2024 COLA increase brings much-needed relief to millions of Americans who rely on Social Security and SSI benefits. With a 3.2% boost in benefits, individuals will experience a tangible improvement in their financial well-being. The automatic annual COLAs ensure that the purchasing power of benefits is not eroded by inflation, providing stability and security for those in need.

As the cost of living continues to rise, the COLA serves as a vital tool in mitigating the impact of inflation on individuals' financial circumstances. By keeping Social Security and SSI benefits aligned with the rising cost of goods and services, the COLA helps to ensure a better quality of life for beneficiaries.

Remember, staying informed and utilizing the resources provided by the Social Security Administration, such as the my Social Security account and the Message Center, can help you access important information promptly and securely