Social Security payments to rise 3.2% in 2024

Social Security recipients will receive a much smaller increase to their monthly payments next year than they received in 2023.

The Social Security Administration announced Thursday that beneficiaries will see a 3.2% cost-of-living adjustment (COLA) in 2024, down from the 8.7% increase in 2023. The increase also falls short of the 3.7% rate of inflation reported by the Consumer Price Index.

The increase raises average monthly retiree benefits by $57.30, according to The Senior Citizens League.

While the COLA may be lower than many were hoping for, financial advisors can help retirees keep things in perspective, said Mike Lynch, managing director of applied insights at Hartford Funds. The 2023 COLA was the highest in more than four decades, and a 3.2% increase is still higher than the 20-year average of 2.6%.

Opportunity for advisors

For retirees feeling disappointed by the 2024 increase, advisors have an opportunity to discuss how investments and tax optimization can help retirement savings outpace inflation, Lynch said.

The average monthly retiree benefit was $1,790 in 2023, according to The Senior Citizens League. The benefits replace roughly one-third of a middle earner’s average wages, but most older adults claim Social Security before reaching full retirement age and receive permanently reduced benefits.

“From day one, Social Security was never designed to be the sole source of income in retirement,” he said. “Now is more important than ever to get in front of clients, quell some of their fears by listening and understanding, and then give them some ideas.”

COLA increases are never a given and there have been years where the adjustment was zero, Lynch added.

“It’s more important than ever to think long-term,” he said. “The only thing you really can control to keep up with and outpace inflation is your own investments.”

COLA reflects moderated inflation

The lower COLA shows that inflation has moderated in 2023. The Social Security Administration bases its annual adjustment on the average rate of inflation during July, August and September as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers. The average inflation across these three months is compared with the third quarter average from the previous year. The difference between the two determines the COLA.

For the 66 million people who receive Social Security, the 3.2% COLA will begin in January 2024. For the 7.5 million people receiving Supplemental Security Income benefits, the increase will begin on December 29.

“This will help millions of people keep up with expenses,” acting commissioner of social security Kilolo Kijakazi said in a statement.

 

Ryan W. Neal has more than 14 years of experience as a reporter, including nine years covering the financial services industry. He formerly served as technology editor at Investment News. 

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