According to the Social Security Administration (SSA), benefits for more than 70 million Americans will increase 1.3% in 2023. The SSA says the cost-of-living adjustment (COLA) is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The CPI-W measures changes in prices paid by urban consumers for a market basket of consumer goods and services. The average monthly Social Security benefit will increase from $1,503 in 2022 to $1,517 in 2023, according to the SSA. For a retiree receiving the maximum monthly benefit of $3,146, that would mean an increase of about $39 per month, or about $468 annually.
How much will Social Security benefits increase in 2024?
According to the Social Security Administration (SSA), Social Security benefits will increase by 1.3% in 2023, which is higher than the 0.3% cost-of-living adjustment (COLA) for 2021.
This means that the average retiree will see their benefits increase by about $20 per month from $1,514 in 2022 to $1,534 in 2023. For a disabled worker, the average monthly benefit will go up $16 from $1,277 to $1,293; and for a widow or widower receiving benefits on a deceased worker’s record, the average monthly benefit will increase by $18 from $1,258 to $1,276.
The COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which measures inflation as experienced by urban workers. The CPI-W rose 1.6% in the 12 months ending September 2020—the largest increase since 2012—mainly due to increases in prices for household furnishings and operations, motor vehicle insurance, and recreation.
How does the cost-of-living adjustment work?
The cost-of-living adjustment (COLA) is a feature of the Social Security program that helps ensure benefits keep pace with inflation. The COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which measures changes in the prices of goods and services purchased by urban workers.
The CPI-W is calculated by the Bureau of Labor Statistics and released at the end of each calendar year. If there is an increase in the CPI-W from the third quarter of the previous year to the third quarter of the current year, then there is a Social Security COLA for the following year. The COLA is effective for December of that same year. For example, if there is a 3% increase in prices measured by the CPI-W from September 2017 to September 2018, then there would be a 3% COLA for December 2018.
The COLA affects benefits payable to more than 70 million people—almost one in five U.S. residents—including Social Security beneficiaries, disabled veterans, federal retirees, and recipients of Supplemental Security Income (SSI). It also affects Medicare Part B premiums, which are deducted from most beneficiaries’ benefit payments.
What other changes are happening to Social Security in 2024?
In addition to the cost-of-living increase, several other changes are happening to Social Security in 2024. The amount of earnings subject to the Social Security tax (FICA) is increasing from $142,800 to $146,500. The Social Security taxable maximum has increased more slowly than average wages in recent years, so this change will help ensure that the system remains sustainable.
The early retirement age is also rising from 62 to 63, and the full retirement age is increasing from 67 to 68. This gradual increase is designed to reflect increases in life expectancy and keep the system solvent for future generations. Finally, the disability threshold is rising from $1,170 to $1,180 per month. This means that people who are unable to work due to a disabling condition can still receive benefits.
When can I start collecting Social Security benefits?
You can start collecting Social Security benefits as early as age 62. However, if you wait until your full retirement age, which is between 66 and 67 depending on when you were born, you will receive a higher benefit amount. And if you delay benefits even further, up to age 70, you will get an even higher monthly payment.
How do I estimate my future Social Security benefits?
To estimate your future Social Security benefits, you can use the Social Security Administration’s (SSA) online benefits calculator. This tool will help you estimate your retirement, disability, and survivors benefits. You will need to input some information about yourself, including your date of birth, gender, and current earnings. The calculator will then provide an estimate of your future benefits.
It is important to remember that your future benefits are based on your past earnings. So, if you have not yet reached your highest earning years, your estimated benefits may change in the future. Additionally, benefit amounts are subject to cost-of-living adjustments (COLAs), which are designed to keep pace with inflation. COLAs are typically announced each year in October and take effect the following January.
Conclusion
Despite some concerns about the long-term viability of Social Security, the program is still going strong and provides vital benefits to millions of retirees. The average monthly benefit is set to increase in 2024, thanks to a cost-of-living adjustment that takes into account inflation. This will provide a much-needed boost for many retirees who rely on Social Security to make ends meet. If you’re counting on Social Security for your retirement income, be sure to stay up to date on the latest news and changes so that you can maximize your benefits.