The Senior Citizens League’s calculations are based on an average retiree benefit of $1,790, which is slightly lower than the $1,837 monthly retirement benefit cited by the Social Security Administration. The variation is due to The Senior Citizens League’s inclusion of spousal and other dependent benefits, in addition to individual worker benefits, explains Mary Johnson, a Social Security and Medicare policy analyst at The Senior Citizens League.
Compared to the significant 8.7% increase beneficiaries experienced in 2023, the projected 3.2% COLA for 2024 may seem modest. However, it is worth noting that this estimate is higher than the average annual increase of 2.6% over the past two decades, as highlighted by Johnson.
Before Social Security beneficiaries make financial plans based on this estimated 3.2% boost for 2024, it’s important to consider a few key factors:
Official 2024 COLA Announcement Expected in October
The Senior Citizens League’s 3.2% COLA estimate relies on consumer price index data up to August. An official COLA for 2024 is anticipated to be announced by the Social Security Administration in October. This official calculation will be based on inflation data from July, August, and September, taken from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). If there is an increase, it will determine the size of the COLA. However, Mary Johnson advises that unexpected inflation fluctuations could still impact the official benefit adjustment for 2024. She estimates a 61% chance of the COLA remaining at 3.2%, with a 9% chance of it being higher and a 30% chance of it being lower.
Medicare Part B Premiums Play a Role
Medicare Part B premiums are typically deducted directly from Social Security payments, meaning their size affects how much beneficiaries see from the COLA increase. These premiums change annually, and the Medicare trustees project an average monthly premium of $174.80 in 2024, up from $164.90 in 2023. Various factors, including the introduction of new medications like the Alzheimer’s drug Leqembi, can impact these costs and the size of Part B premiums. The Senior Citizens League suggests that Leqembi may add an extra $5 per month to the average monthly Medicare Part B premium in the coming year. Medicare Part B premium rates for the following year are generally announced in November.
Claiming Social Security Benefits Strategically
If you’re considering claiming Social Security retirement benefits soon, it might be tempting to do so in 2023 to take advantage of the record 8.7% COLA increase. However, experts advise against this strategy. Bruce Tannahill, a director of estate and business planning at MassMutual, emphasizes that there’s no need to start benefits immediately to benefit from COLA adjustments. Social Security adjusts projected benefits to reflect cost-of-living increases that occur before retirement. Therefore, it’s wise to prioritize finding a claiming strategy that aligns with your circumstances and maximizes your monthly benefit income.
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Even as inflation rates have eased somewhat, current Social Security beneficiaries continue to grapple with rising costs, particularly in housing, food, and medical expenses, which account for roughly 80% of retiree spending, according to Johnson. As she notes, despite the 8.7% COLA, no one is getting rich, and financial challenges persist for many retirees.
