The Social Security Administration is set to announce a projected 3.2% raise for Social Security recipients in 2024. While this adjustment is higher than average, it may not be enough to combat the persistent issue of inflation.
Annual Cost-of-Living Adjustment for Social Security Recipients
Every year, the Social Security Administration calculates the cost-of-living adjustment for the nation’s approximately 67 million Social Security recipients. This adjustment is based on the difference in average inflation between the third quarter of the current year and the same period from the previous year. According to calculations by the nonpartisan advocacy group, the Senior Citizens League, this estimate stands at 3.2%.
A Comparative Analysis
Soaring Housing and Food Costs
Housing and food expenses have experienced substantial increases over the past year. Shelter costs, for instance, rose by 7.3% in the 12 months ending in August, as reported by the Bureau of Labor Statistics. Furthermore, food costs increased by 4.3%. A recent poll conducted by the Senior Citizens League revealed that more than two-thirds of respondents reported household expenses remaining at least 10% higher than they were one year ago.
It is evident that while the projected raise provides some relief for Social Security recipients, the challenge posed by rising living costs persists.
Expected Increase to Medicare Part B Premiums Impact Social Security Raise
In the upcoming year, there is an expected increase in Medicare Part B premiums, which will have an impact on the modest Social Security raise. Medicare Part B premiums are automatically deducted from the majority of beneficiaries’ Social Security checks. The Centers for Medicare and Medicaid Services are set to announce the premium for 2024 later this fall. According to projections from the Senior Citizens League, the standard Part B premium for 2024 could rise to approximately $179.80 per month, surpassing this year’s $164.90.
Taxes and their Effect on Retirees’ Benefits
Additionally, taxes may further diminish retirees’ benefits. If an individual’s combined income exceeds $25,000 or a couple’s combined income surpasses $32,000 when filing a joint tax return, federal income taxes must be paid on a portion of their benefits. These income thresholds have remained unchanged since their implementation in 1984 and have not been adjusted for inflation.
Taxation on Social Security Benefits
Last year, there was an introduction of taxes on Social Security benefits for many individuals. According to a poll conducted by the Senior Citizens League, as high as 26% of respondents who had been receiving Social Security for more than three years reported paying taxes on a portion of their benefits for the first time in their 2022 tax return. With this year’s significant Cost-of-Living Adjustment (COLA), even more beneficiaries may be pushed into taxable territory for the year 2023.
Utilizing the Annual COLA
It’s worth noting that individuals who are at least 62 years old can benefit from the annual COLA, regardless of whether they are currently receiving Social Security. From the year an individual turns 62, the COLA is applied to their Primary Insurance Amount (PIA) — the amount they would receive if they claimed at their full retirement age. For those born in 1960 or later, the full retirement age is 67. This means there’s no need to claim Social Security earlier than planned in order to receive a larger-than-average raise.