What Will the COLA Increase Be for 2024?
Discover the 2024 COLA increase. Learn how this vital Cost-of-Living Adjustment is determined and its effect on your Social Security benefits.
Discover the 2024 COLA increase. Learn how this vital Cost-of-Living Adjustment is determined and its effect on your Social Security benefits.
The Cost-of-Living Adjustment (COLA) represents an annual adjustment applied to Social Security and other benefits. Its purpose is to maintain the purchasing power of beneficiaries, ensuring their benefits keep pace with the rising cost of goods and services due to inflation. This yearly announcement holds considerable importance for millions of Americans who rely on these benefits.
The official Cost-of-Living Adjustment (COLA) for 2024 was set at 3.2%. This increase became effective for Social Security benefits beginning in December 2023, with payments reflecting the adjustment received in January 2024. For Supplemental Security Income (SSI) recipients, the increased payment levels were also effective for January 2024.
The 3.2% adjustment resulted in an estimated increase of about $59 per month for the average retired worker.
The purpose of the Cost-of-Living Adjustment (COLA) is to protect the purchasing power of Social Security and Supplemental Security Income (SSI) benefits. This adjustment is necessary because the cost of everyday goods and services increases over time, a phenomenon known as inflation. Without regular adjustments, the fixed income of beneficiaries would gradually lose its value.
The provision for COLAs is mandated by law, enacted in 1973, ensuring benefits are automatically adjusted to reflect changes in living costs. Automatic annual COLAs have been standard practice since 1975, providing a consistent mechanism to combat the effects of inflation on benefit amounts.
The COLA is determined using a specific methodology outlined in the Social Security Act. This calculation relies on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The CPI-W is a measure of inflation tracked by the U.S. Department of Labor’s Bureau of Labor Statistics, reflecting price changes for a basket of goods and services relevant to urban wage earners.
To calculate the COLA, the Social Security Administration compares the average CPI-W for the third quarter (July, August, and September) of the current year with the average CPI-W for the third quarter of the last year a COLA became effective. The percentage increase between these two periods directly translates into the COLA percentage, rounded to the nearest one-tenth of one percent. If there is no increase in the CPI-W, or if the calculated increase rounds to zero, then no COLA is applied for that year. The Social Security Administration officially announces the COLA in October each year, after the third-quarter inflation data becomes available.
The COLA applies to various types of benefits, including Social Security retirement benefits, disability benefits, and survivor benefits, as well as Supplemental Security Income (SSI) payments. The announced COLA percentage is applied to an individual’s Primary Insurance Amount (PIA), which forms the basis of their Social Security benefit. The COLA effectively increases the benefit amount by the determined percentage.
Beneficiaries typically see the increase reflected in their January payments. SSI payments for January may be issued at the end of the preceding December. The Social Security Administration sends out notices, usually in December, detailing the new benefit amount for each individual. These notices provide a clear breakdown of how the COLA has affected their specific payments.