Some 70 million Americans who receive Social Security checks have their eyes on the calendar this week. Thursday, Oct. 12 is the date set for the Social Security Administration to announce its cost-of-living adjustment, or COLA, for 2024.
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The Social Security COLA is, essentially, the “raise” beneficiaries can look forward to next year. Unfortunately, it’s not going to be much of a raise this time around.
The Social Security COLA for 2024 is expected to be around 3.2%. That’s a big step down from the 2023 benefits increase, which was 8.7%.Â
The 3.2% estimate comes from the Senior Citizens League, a nonpartisan pro-senior think tank based in Alexandria, Va. A COLA of 3.2% would raise an average monthly retiree benefit of $1,790 by $57.30.
While a 3.2% COLA is significantly lower than the 8.7% received in 2023 — the highest COLA in more than four decades — it’s higher than the average over the past 20 years — which was 2.6%, the SCL said in a recent statement.
Falling Inflation Also Nips The Social Security COLA
The big decline year-over-year is due inflation rates falling in 2023 after two years of surging prices.
The inflation rate has slowed. However, older Americans are still strained from two years of historically high consumer prices. Household expenses remain high in essential spending categories, the SCL says. A June survey shows 62% of participants cite food costs as their fastest-growing cost. Housing costs are the biggest concern of 22% of survey respondents.
According to the SCL’s latest Retirement Survey, taken last month, 45% of those participating report spending less than $2,000 on monthly expenses in 2023.
How Much Do Retirees Spend Per Month In 2023?
| Monthly spending | % of retirees |
|---|---|
| Less than $1,000 | 8% |
| $1,001-$1,999 | 37% |
| $2,000-$3,999 | 37% |
| $4,000-$5,999 | 11% |
| More than $5,999 | 4% |
| Uncertain | 3% |
Source: The Senior Citizens League Retirement Survey, Sept. 7, 2023; 2,258 responses
According to Labor Department data from Sept. 13, 2023, the annual inflation rate came in at 3.7% for the 12 months ended August. This follows a rise of 3.2% in the previous period.Â
Retirees may feel the squeeze because the Social Security Administration calculates next year’s Social Security COLA using the average of the CPI-W readings for July, August and September.
Since January, the actual inflation rate was lower than the amount Social Security beneficiaries received in their 8.7% COLAs. “That difference theoretically should provide a modest temporary improvement in buying power of roughly $52 per month for a retiree with average benefits of $1,694.00. Inflation, however, was so severe in 2021 and 2022 that the average Social Security benefit fell behind by $1,054, leaving 53% of retirees doubting they will recover because household costs rose more than the dollar amount of their COLAs,” the SCL has said.
From Smaller Social Security COLAs to Overpayments
Unfortunately, smaller Social Security COLAs isn’t the only thing beneficiaries might have to worry about. In a statement Wednesday, the Social Security Administration said it’s going to take a closer look at its procedures for clawing back overpayments.
It’s not clear exactly how much money in overpayments the agency needs to track down and collect. Social Security pays $1.4 trillion in benefits to more than 71 million people each year. “Only around 0.5% of Social Security payments are overpayments,” according to the statement.
“Despite our high accuracy rates, I am putting together a team to review our overpayment policies and procedures to further improve how we serve our customers,” said Kilolo Kijakazi, Acting Commissioner of Social Security. Kijakazi took issue with what she called “misinformation in the media claiming that the Social Security Administration is attempting to collect $21 billion.” That number, she said, “was derived from the total amount of overpayments that have occurred over the history of the programs.”
Social Security recipients who think they have been overpaid can file an appeal or make a request that the Social Security Administration not seek the money back. The agency also said it’s working to reduce overpayments in the future and make relief more accessible to overpaid beneficiaries seeking waivers.
Medicare Premiums Will Increase In 2024 As Well
Another increase most Americans 65 and over face each year is the increase in Medicare premiums. Medicare premiums don’t rise with the cost of inflation, but they do rise steadily as health care costs increase.
For those who receive both Social Security and Medicare Part B, the Social Security Administration automatically deducts the Medicare premium from monthly benefits. This leaves many beneficiaries wondering if a hike in Medicare premiums will blunt the benefit of a Social Security COLA.
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The overall benefit (or disadvantage) of the 2024 Social Security COLA depends on the hike in Medicare premiums.
Medicare premiums for the coming year will be announced in November. Medicare Trustees said in March in their annual report that monthly Part B premiums are seen increasing to $174.80 in 2024, up from $164.90 this year. Also, that estimate doesn’t include any significant new costs that come up after the estimate is released, the SCL notes.
AARP projects that the average monthly premium for Medicare Advantage plans, an alternative to original Medicare, will increase by just 64 cents in 2024. The Centers for Medicare & Medicaid Services say that nearly 73% of enrollees will not see any increase in the monthly charges for their current plan next year.
Hold-Harmless Provision Helps Protects Benefits
Social Security works with the Centers for Medicare and Medicaid Services to prevent a reduction in Social Security benefits as a result of Medicare Part B premium increases. The “hold harmless provision” protects Social Security benefit payments from decreasing due to an increase in the Medicare Part B premium for most beneficiaries.
Generally, to qualify for the hold harmless provision, recipients must receive Social Security benefits or be eligible for Social Security benefits for November and December of the current year. They must also have Medicare Part B premiums for December and January deducted from monthly benefits.
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