New government inflation data points to a 3.2% Social Security cost-of-living adjustment in 2024, according to a new estimate from The Senior Citizens League.
That would raise the average monthly retirement benefit by about $57.30, according to the nonpartisan senior group.
The Senior Citizens League’s calculations are based on a current average retiree benefit of $1,790. That is lower than the $1,837 average monthly retirement benefit cited by the Social Security Administration, due to the fact that it includes spousal and other dependent benefits, in addition to those of workers, according to Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League.
The projected 3.2% Social Security COLA for 2024 is much lower than the official 8.7% increase beneficiaries saw in 2023. But it is higher than the annual 2.6% average increase over the past 20 years, according to Johnson.
Before you factor in the impact the estimated 3.2% boost may have on your benefits in 2024, there are three things to keep in mind.
1. Official 2024 COLA should be revealed in October
The Senior Citizens League’s 3.2% COLA estimate is based on consumer price index data through August.
An official COLA for 2024 is expected to be announced by the Social Security Administration in October.
That official calculation will be based on inflation data for July, August and September from the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W.
The data from those three months will be added and averaged and then compared with the third quarter average from 2022. If there is an increase, that determines the size of the COLA.
“At this point, there’s always a chance of inflation doing something totally unexpected,” Johnson said, which may affect the official benefit adjustment for 2024.
There is a 61% chance the COLA for 2024 will be 3.2%, according to Johnson.
Meanwhile, there is a 9% chance of it going higher and a 30% chance it may be lower, she said.
2. Medicare Part B premiums affect increases
Medicare Part B premiums are typically deducted directly from Social Security checks.
Consequently, the size of those premiums affects how much of the COLA beneficiaries may see.
Medicare Part B premium rates also change each year. The Medicare trustees have projected the average monthly premium may be $174.80 in 2024, up from $164.90 in 2023.
Certain factors, particularly a new Alzheimer’s drug, may affect costs and the size of the Part B premiums.
The Senior Citizens League estimates the Alzheimer’s treatment, Leqembi, may add $5 per month to the average monthly Medicare Part B premium next year.
Medicare Part B premium rates for the following year are typically announced in November.
3. Think twice before starting benefits this year
If you’re on the brink of claiming Social Security retirement benefits, you may be tempted to claim this year to get the record 8.7% boost for 2023.
But experts say that is a misguided strategy.
“You don’t have to start now to get the benefit of a cost-of-living adjustment,” Bruce Tannahill, a director of estate and business planning at MassMutual, recently told CNBC.com.
“Social Security will adjust your projected benefits to reflect the cost-of-living adjustments that occur prior to the time that you retire,” he said.
Instead, it’s best to prioritize finding a claiming strategy that fits your circumstances and will maximize your monthly benefit income.
Even as the inflation rate has come down, current Social Security beneficiaries are still struggling with higher prices due to inflation, particularly when it comes to housing, food and medical costs, which make up about 80% of retiree spending, according to Johnson.
“Nobody’s out of the woods,” Johnson said. “Nobody’s getting rich from the 8.7% COLA.”