[Updated for projected 2024 Increase] Soaring inflation and related Fed rate hiking actions had a silver lining for many eligible recipients in 2023, with a 8.7% increase (~$145 p/month) in Social Security (SS) benefits and Supplemental Security Income (SSI) payments in 2023.
The 2024 increase however is expected to much smaller as inflation cools, with estimates and current CPI trends putting the 2024 Cost of Living Adjustment (COLA) between 3% and 3.4%. This would be equivalent of a $40 to $60 monthly increase in SS and SSI benefits.
I will publish updated 2024 COLA forecasts as they are made available and you can subscribe to get the latest updates.
2023 COLA Changes
With Medicare Part B premiums declining in 2023, which are deducted from Social Security, most retirees will see an even more significant boost to their retirement income and keep the entire COLA raise.
Retirees can start Social Security benefits any time between ages 62 and 70, with the benefit amount increased for every month of delay. Cost-of-living increases start at age 62 and continue for as long as you live.
Around 70 million Americans get Social Security beneficiaries which includes ~8 million Supplemental Security Income recipients.
According to the AARP, over 40% of Americans age 65 and older rely on Social Security for 50% of more of their income. So the latest increase will benefit a number of Americans.
“The guaranteed benefits provided by Social Security, including the annual COLA, are more crucial than ever, as high inflation remains a problem for older Americans….the automatic adjustment is an essential part of Social Security that helps ensure the benefit does not erode over time due to rising prices.”Jo Ann Jenkins, AARP CEO
Other key updates from the SSA for 2023 include:
- The average SS benefit (across all recipient groups) is going from $1,681/mo to $1,827/mo
- The maximum SS benefit at full retirement age is going from $3,345/mo to $3,627/mo in 2023
- Most federal government retirees, on the Civil Service Retirement System, will receive the same increase.
Employees and Self-Employed hit hard by COLA Increase
The maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $160,200. This means that the average employee will pay around $9,930, or $818 more in Social Security taxes (excluding Medicare taxes) during 2023.
Self employed individuals will see double the hit as they have to pay the employer and employee share of Social security (and medicare) taxes.
SSA COLA Tables
Here are the official 2023 changes form the SSA: