Social Security payments could rise 3.2% in 2024

Following a rise in annual inflation for August, the Social Security cost of living adjustment (COLA) for 2024 is projected to rise 3.2%, according to an analysis by The Senior Citizens League (TSCL). That boost would raise the average monthly benefit of $1,790 by $57.30, bringing it to a total average of $1,847.30.

However, that forecasted raise is far from the historic 8.7% increase seen in 2023. 

“In 2023, retirees received the highest COLA in 40 years — (8.7%), but nobody is getting rich,” TSCL said in a statement. “The reality is that the dollar amount of the COLA increase received is meager at best.”

More than half (55%) of beneficiaries that year reported spending more than $2,000 a month on expenses, according to TSCL data. And 45% said they spent less than $2,000 a month.

Nonetheless, Social Security benefits remain the sole source of income for 40.2% of American retirees, according to research by the National Institute on Retirement Security (NIRS).

The official annual COLA to Social Security benefits will be announced in mid-October. By law, it’s calculated using inflation during July, August and September as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The rates for all three months are added together and averaged before being compared with the third quarter average from one year prior. The official COLA is the percentage difference between the two. This would be reflected in the first Social Security checks sent out January 2024.

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Americans are losing hope on Social Security 

More than half of Americans can no longer rely on Social Security. In fact, 74% of adults said they can’t count on Social Security benefits as an effective component of a retirement income strategy, according to a survey by Allianz Life. And 88% said it’s crucial to supplement Social Security benefits with another source of guaranteed income in order to plan a comfortable retirement.

“Social Security benefits are often the backbone of a retirement strategy but it cannot be your entire strategy,” Kelly LaVigne, Allianz Life vice president of consumer insights, said in a statement. “A strong retirement strategy will ensure you have enough guaranteed income to cover your essential expenses. That guaranteed income can come from Social Security benefits along with other investments and protection products such as annuities.” 

However, many of today’s workers may not get their full Social Security benefits down the road. In 2033 – when the Social Security fund or the Old-Age & Survivors Insurance (OASI) fund is expected to become insolvent – the average couple retiring that year could experience an annual benefits cut of $17,400 in today’s dollars, according to an analysis by the Committee for a Responsible Federal Budget (CFRB). 

“Upon insolvency, the law mandates that the OASI trust fund can only spend in amounts equal to incoming trust fund revenue, which means that all 70 million retirees, dependents and survivors – regardless of age, income, or need – will see their benefits cut by 23 percent,” the CFRB said.

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When should you start collecting Social Security? 

Many financial experts recommend people begin collecting Social Security when they reach their full retirement age or until they turn 70 if possible. Full retirement age is based on birth year. At full retirement age, Social Security recipients are eligible for their full benefits. But if they delay collecting benefits until they reach age 70, their benefits increase.

However, eligible Americans can begin earning Social Security benefits at age 62. But doing so would reduce monthly payments by a certain percentage up until full retirement age. That reduction is based on several factors including birth year.

“If you claim Social Security at age 62, rather than wait until your full retirement age (FRA), you can expect a 30% reduction in monthly benefits,” Fidelity Investments said in a post. “For every year you delay claiming Social Security past your FRA up to age 70, you get an 8% increase in your benefit. So, if you can afford it, waiting could be the better option.”

Still, Social Security benefits generally cover about only a third of a middle-income worker’s average wages, according to an Actuarial Note from the Social Security Office of Chief Actuary. 

“Making matters worse, most older adults claim Social Security benefits before reaching full retirement age and receive permanently reduced benefits,” TSCL said.

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