COLA for Social Security in 2024

Chloe Schmidt

By: Chloe Schmidt, Marketing Consultant at Asset Marketing Systems

Originally Written: August 22nd, 2023
Updated: December 7th, 2023

Social Security plays a crucial role in providing financial stability and support to millions of Americans, particularly retirees and individuals with disabilities. Each year, the Social Security Administration (SSA) adjusts benefit payments to account for changes in the cost of living. This adjustment, known as the Cost of Living Adjustment (COLA), ensures that benefits keep pace with inflation and maintain their purchasing power. In this blog, we will explore the COLA for Social Security in 2024 and its implications for beneficiaries.

What is COLA and How Does it Work?

COLA, or Cost of Living Adjustment, is an annual increase in Social Security benefits based on changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The CPI-W measures price changes for a basket of goods and services commonly purchased by urban wage earners and clerical workers.

The COLA is calculated by comparing 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 previous year. If there is an increase in the CPI-W, Social Security benefits receive a corresponding increase to keep up with rising living costs.

COLA for Social Security in 2024

In October, the Social Security Administration announced the 2024 COLA will increase by 3.2%. The increased payments will begin to process on December 29, 2023. In recent years, COLA increases have ranged from 0.3% to 2.8%. The COLA percentage for 2024 depends on the CPI-W data for the third quarter of 2023 and any subsequent revisions.

Download the 2024 COLA Fact Sheet

It’s important to note that the COLA percentage may vary from year to year, depending on economic factors and inflation rates.

Implications for Social Security Beneficiaries

The COLA for Social Security has a direct impact on the purchasing power of benefit payments for retirees, disabled individuals, and survivors. A higher COLA percentage means an increase in benefit amounts, while a lower COLA percentage or no adjustment may result in stagnant benefit payments.

For beneficiaries, the COLA can help offset the effects of inflation and rising costs of essential goods and services such as healthcare, housing, and groceries. The adjustment helps ensure that Social Security benefits remain relevant and provide meaningful support to recipients. It’s worth noting that while the COLA helps adjust benefit amounts, it may not entirely keep pace with specific cost increases, especially in areas with high inflation rates. Personal spending habits and regional variations can also affect how individuals experience the impact of COLA adjustments.

Planning Ahead

If you are a financial advisor, it’s essential to stay informed about the COLA adjustments and plan your clients’ finances accordingly. Here are a few tips to consider:

  • Monitor Announcements: Keep an eye out for official announcements from the Social Security Administration regarding the COLA for the coming year. This will help you understand the potential impact on your clients’ benefit payments.

  • Review Budget and Expenses: Assess your clients’ current budget and spending habits. Consider how potential COLA adjustments may impact their ability to cover essential expenses and plan accordingly.

  • Seek Professional Guidance: If your clients are uncertain about how COLA adjustments might affect their financial situation, schedule a one-on-one to walk them through the implications of COLA. Then you can provide personalized advice based on their specific circumstances.

The annual COLA for Social Security benefits is a vital component of maintaining the purchasing power of benefit payments. The COLA helps ensure that benefits keep pace with inflation and rising living costs. By understanding how COLA works and its potential implications, individuals can make informed financial decisions to support their well-being in the coming year.

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