In 2024, Social Security beneficiaries are set to receive a 3.2% increase in their benefits, a stark contrast to this year’s extraordinary hike, indicating a slowdown in consumer price increases.
The cost-of-living adjustment (COLA) translates to an average monthly increase of over $50 for recipients, beginning in January, as reported by the Social Security Administration on Thursday. The AARP estimates this boost at approximately $59 per month.
Kilolo Kijakazi, acting commissioner of Social Security, expressed, “This increase will assist millions in managing their day-to-day expenses.”
Roughly 71 million individuals, spanning retirees, disabled individuals, and children, rely on Social Security benefits.
This announcement follows the notable 8.7% increase in benefits experienced this year, a result of the historically high 40-year inflation rates that drove up the prices of consumer goods. With inflation now stabilizing, the upcoming annual increase is notably more modest.
Martha Shedden, president of the National Association of Registered Social Security Analysts, remarked, “In comparison to last year’s 8.7% hike, this will feel relatively small, and there is a perception that it may not keep pace with the ongoing inflation and the increasing living costs for retirees.”
In addition to this, an expected rise in Medicare premiums for 2024 is likely to offset the Social Security cost-of-living increase. While traditional Medicare has not yet disclosed the extent of the increase, Medicare Advantage plans are anticipated to remain steady.
However, advocates for senior citizens have celebrated the annual Social Security adjustment. AARP CEO Jo Ann Jenkins noted, “Retirees can breathe a bit easier knowing that they will soon receive a boost in their Social Security payments to help them cope with the rising expenses.”
Social Security is funded through payroll taxes collected from both workers and employers. The maximum earnings subject to Social Security payroll taxes will rise to $168,600 for 2024, up from $160,200 in 2023. Retirees who rely solely on Social Security income are exempt from taxes on that income.
Nancy Altman, president of Social Security Works, an advocacy group for the social insurance program, underlined the significance of COLA and urged Congress to pass legislation to safeguard and expand benefits. Nonetheless, the program faces a substantial financial shortfall in the near future.
The annual Social Security and Medicare trustees report, issued in March, revealed that the trust fund for the program will be unable to meet the full benefit obligations from 2033 onwards. If the trust fund is depleted, the government will only manage to pay out 77% of the scheduled benefits, according to the report.
While there have been proposals in Congress to strengthen Social Security, none have advanced past committee hearings. A March poll by The Associated Press-NORC Center for Public Affairs Research found that the majority of U.S. adults oppose measures that would cut Medicare or Social Security benefits, with 79% of respondents opposing reductions in Social Security benefits.
It is important to note that the Social Security Administration is currently without a permanent leader, as President Joe Biden nominated former Maryland Governor Martin O’Malley to head the agency in July.
The COLA is currently determined using the Consumer Price Index (CPI) from the Bureau of Labor Statistics. However, there have been calls to consider an alternative index, the CPI-E, which measures price fluctuations based on the spending habits of the elderly, including healthcare, food, and medication costs. Any alteration in the calculation method would require approval from Congress. Nevertheless, given the historical inactivity surrounding Social Security and the current gridlock in the House, senior citizens and their advocates are skeptical about the prospects of any changes being approved in the near future.
These cost-of-living adjustments will have a substantial impact on individuals like Alfred Mason, an 83-year-old resident of Louisiana. Mason emphasized that “any increase is welcome because it helps us cope with our current situation.” He stressed that, given the persistent high inflation, any addition to his income would be greatly appreciated.