Understanding the Annual Social Security Cost of Living Adjustment

Today, the Social Security Administration released their cost of living adjustment (COLA) for 2024, an increase of 3.2%. While this number is essential for those receiving benefits, it can be helpful to you regardless of your benefit status. Read on for more details.

If you are currently receiving Social Security benefits:

• You’ll soon receive an updated benefit letter from the Social Security Administration.
• The letter will detail your 2024 monthly benefit amounts as well as any updated Medicare deductions.
• You can use your benefit letter as proof of income when applying for loans. Or, if you’re applying for assistance programs, such as those for food, rent, or energy, you’ll most likely need a copy of your letter.
• Access your personal my Social Security account to review or update direct deposit information, access tax forms, or find out when your next benefit payment occurs.

If you are planning to retire soon:

• Knowing the COLA will help you plan your future benefits. Access your personal my Social Security account and review your salary history and contact information.
• Plan your benefit amount. Recently, the Social Security Administration came out with an interactive chart for your retirement benefits. In addition to showing your Full Retirement Age and estimated monthly benefit amount at that time, you can use the sliders to see what your benefit would be if you started now or delayed benefits.
• If you’re ready, start your application. Review the checklist and begin the application process right from the Social Security website.

If you aren’t anticipating benefits anytime soon:

• Access your personal my Social Security account
• Double-check your eligibility and earnings. It’s easier to fix now when the information is still fresh and recent tax returns aren’t buried in your filing cabinet.
• Run your retirement projections. See your Full Retirement Age and estimated monthly benefit amount at that time, or earlier or later dates. Seeing an estimated monthly amount to compare to your current salary can help you estimate if you are going to have a surplus or shortage when it comes to retirement. And supplementing that benefit by saving for retirement now will help in the long run.

If you like numbers or statistics:

• 2023 Average Benefit*: $1,706
• Estimated Average Benefit adjusted for 2024: $1,760
• Previous Year COLAs*:
  • 2023: 8.7%
  • 2022: 5.9%
  • 2021: 1.3%
  • 2020: 1.6%
  • 2019: 2.80
  • Lowest: 0.0% in 2009, 2010, and 2015
  • Highest: 14.3% in 1980

Did you know? Since 1975, the Social Security Administration has used cost of living adjustments for benefit increases. Prior to that, Social Security benefit increases were set by legislation.

For all ages, the annual COLA is helpful in so many ways:

• Keep your my Social Security account up to date. If you read the various age suggestions, you’ll see that I’ve referenced this site in each area. Regardless of your age, if you are working, you should be reviewing this site each year to ensure contact information is accurate and to review estimated benefits. If you’re used to receiving an annual projection in the mail**, this information is now on the website; you’ll receive an email reminder annually approximately 3 months before your birthday.
• Use it to run retirement projections. Did you know that when you log into your BPAS account, there’s a Mile Marker to estimate your retirement surplus or shortfall? While the Mile Marker provides an estimate of your current account balance, you can further customize it with outside assets, including Social Security benefits. For a realistic analysis, providing your updated benefit amount is helpful!
• Want more? We have a page at BPAS University about Social Security & Medicare. Watch the videos, take a quiz, and learn more about these benefits!
• Stay tuned! The IRS releases the annual contribution limits for retirement accounts shortly after Social Security’s announcement. If you’re planning to max out, or even just increase your retirement savings, this information is helpful to have!

*Courtesy of the Social Security Administration

**I’m showing my age here, but I was so excited when I received this statement as a teenager. At least it let me know what that FICA line from my paycheck meant! I’m also of the age that I now complain that the price of candy bars used to be 40 cents; these trick-or-treaters better be happy!