The Social Security Administration has announced a 3.2% increase in Social Security benefits for the year 2024. With inflation so high, this additional money is a big help to retired and disabled Americans.

Social Security is there to help disabled Americans and retired seniors. That’s why for the upcoming 2024 calendar year, a cost of living adjustment (COLA) has been announced. With inflation data showing that consumer buying power is down, this historic increase in benefits will be a huge boon for those collecting a monthly check from the SSA.

2024 SOCIAL SECURITY - 3.2% INCREASE

Important 2024 Social Security information is as follows:

Tax Rate	2023	2024
Employee	7.65%	7.65%
Self-Employed	15.30%	15.30%

NOTE: The 7.65% tax rate is the combined rate for Social Security and Medicare. The Social Security portion (OASDI) is 6.20% on earnings up to the applicable taxable maximum amount (see below). The Medicare portion (HI) is 1.45% on all earnings. Individuals with earned income of more than $200,000 ($250,000 for married couples filing jointly) pay an additional 0.9% in Medicare taxes. The tax rates shown above do not include the 0.9%.

	2023	2024
Maximum Taxable Earnings
Social Security (OASDI only)	$160,200	$168,600
Medicare (HI only)	No Limit
Quarter of Coverage
	$1,640	$1,730
Retirement Earnings Test Exempt Amounts
Under full retirement age	$21,240/yr ($1,770/mo)	$22,320/yr ($1,860/mo)
NOTE: $1 in benefits will be withheld for every $2 in earnings above the limit.
The year an individual reaches full retirement age	$56,520/yr ($4,710/mo)	$59,520/yr ($4,960/mo)
NOTE: Applies only to earnings for months prior to attaining full retirement age. $1 in benefits will be withheld for every $3 in earnings above the limit.
Beginning the month an individual attains full retirement age		None
	2023	2024
Social Security Disability Thresholds
Substantial Gainful Activity (SGA)
Non-Blind	$1,470/mo	$1,550/mo
Blind	$2,460/mo	2,590/mo
Trial Work Period (TWP)	$1,050/mo	$1,110/mo

Maximum Social Security Benefit: Worker Retiring at Full Retirement Age
	2023	2024
	$3,627/mo	$3,822/mo
SSI Federal Payment Standard
Individual	$914/mo	$943/mo
Couple	$1,371/mo	$1,415/mo
SSI Resource Limits
Individual	$2,000	$2,000
Couple	$3,000	$3,000
SSI Student Exclusion
Monthly limit	$2,220	$2,290
Annual limit	$8,950	$9,230
Estimated Average Monthly Social Security Benefits Payable in January 2024
	Before 3.2% COLA	After 3.2% COLA
All Retired Workers	$1,848	$1,907
Aged Couple, Both Receiving Benefits	$2,939	$3,033
Widowed Mother and Two Children	$3,540	$3,653
Aged Widow(er) Alone	$1,718	$1,773
Disabled Worker, Spouse and One or More Children	$2,636	$2,720
All Disabled Workers	$1,489	$1,537

History of SSA Cost of Living Increases

As you can see in the information below, the Cost of Living Adjustments (COLA) typically increases over time. The chart shows how inflation has increased throughout the years.

Year	Benefit Rate Increase
2000	3.50%
2001	2.60%
2002	1.40%
2003	2.10%
2004	2.70%
2005	4.10%
2006	3.30%
2007	2.30%
2008	5.80%
2009	0%
2010	0%
2011	3.60%
2012	1.70%
2013	1.50%
2014	1.70%
2015	0%
2016	0.30%
2017	2.0%
2018	2.80%
2019	1.60%
2020	1.30%
2021	5.90%
2022	8.70%
2023	3.20%

A Social Security COLA increase does not have to happen every year, but most years it does. This year, inflation has increased 3.2%. Current inflation data is continuing the worrisome trend from the summer and the entirety of 2023. Social Security beneficiaries are feeling the pinch just as much as individuals in the workforce.

The difference is that working individuals may be able to adjust their income by obtaining a raise, changing jobs, or taking a second job. They may have a spouse who can do the same. But what about disabled workers and retired seniors? With fixed incomes, these Americans are in somewhat of a vulnerable position. The Social Security increase 2024 announcement provides some relief for recipients of Social Security benefits.

The underlying cause for this Social Security cost of living adjustment is the rampant inflation we have been seeing and experiencing. The outcome of inflation is easy enough to see: car loans, mortgage payments, food, transportation, and medicine have all gotten much more expensive. According to USDA data, the cost of fruit has increased as high as 20% in recent years. Certain meat products have increased by 18%. And certain wheat products have increased by 16%.

For someone on a fixed income, these numbers are devastating. And for retirees and disabled workers who do still have mortgage payments, car loans, and other debt, fixed income and inflation can create the perfect storm.

What Is the Consumer Price Index?

The Consumer Price Index measures the prices of a diverse range of goods and services that are purchased by consumers. The CPI-W specifically addresses living costs for urban wage earners and clerical workers, which is around 30% of the population. The CPI-W is what the Bureau of Labor Statistics uses to determine changes to Social Security benefits. If you’re wondering what exactly goes into the CPI basket, it’s mostly housing (42%) followed by transportation costs (16%), food and beverage (15%), other goods and services (12%), recreation (6%), and medical care (9%).

What Is COLA?

COLA stands for cost of living adjustment. Prior to 1972, Social Security increases had to be specially approved by Congress. But with the creation of the COLA Provision in the 1972 Social Security Amendments, automated COLA began in 1975. If the CPI-W indicates no changes to the cost of living, COLA will not be applied to Social Security benefits.

COLA adjustments happen almost every year. In the past, these adjustments have ranged from 0% to as high as 8.7% in 2023. Remember that these numbers are meant to help benefits keep up with the rising costs of goods and services. This provides important financial assistance for Americans on fixed incomes.

How the SSA Calculates COLA

The Social Security Administration uses the Consumer Price Index (specifically the CPI-W for wage earners and clerical workers) to determine if COLA is applicable. Although this CPI is determined on a monthly basis, the COLA is determined annually—but only if there was an increase in the CPI-W between the third quarter of the current year and the third quarter of the previous year. As it turns out, this happens most years. These increases are rounded to the nearest tenth of one percent.

The purpose of these Cost of Living Adjustments is to make sure that Social Security benefits are adequate enough to keep up with the rising cost of goods and services, or inflation.

It’s important to note that inflation is far more nuanced than an actual number. COLA is a federal adjustment based on averages. Groceries are indeed more expensive in New York than they are in Texas, and gas may be more expensive in Hawaii than in either of those states. This is why everyone needs to have a retirement plan—COLA adjustments can’t account for everything. But for many disabled and retired Americans, these annual cost of living increases can be very beneficial.

10 Types of Inflation

Why does inflation happen? There are actually 10 different types of inflation.

Knowing the different types of inflation can help you understand the economic changes happening in our country.

Creeping Inflation

This is the mildest form of inflation. When prices of goods and services rise by less than 3% annually, it's called creeping inflation. This level of inflation is generally considered acceptable and can even indicate a healthy economy.

Walking (or Trotting) Inflation

Walking inflation refers to a scenario where price increases range between 3% to 9%. It's a moderate level of inflation, indicating that the economy is heating up. If not addressed, it might escalate into more severe forms of inflation.

Running (or Galloping) Inflation

When the price increase surges over 10% inflation is said to be running or galloping. It shows that prices are rapidly increasing, and corrective measures are needed to stabilize the economy.

Cost-push Inflation

This type of inflation happens when the costs of production increase, such as wages and the cost of raw materials. When it becomes more expensive for businesses to produce goods and services, they pass on these costs to consumers by raising prices.

Demand-pull Inflation

Demand-pull inflation results when the demand for goods and services exceeds supply. If too many consumers want to buy a limited number of products, the prices of these products will likely go up.

Deflation

Deflation is a decline in the prices of goods and services. While it might seem like a good thing on the surface, prolonged deflation can harm an economy, leading to reduced consumer spending and business investment.

Disinflation

Disinflation is a reduction in the rate at which prices increase. For example, if inflation was 5% last year and is 3% this year, the economy is experiencing disinflation. This is not the same as deflation, where prices drop.

Reflation

Reflation is an economic policy employed by governments and central banks to boost a struggling economy. By increasing money supply or government spending and reducing interest rates, they aim to spur economic activity and curb deflation.

Hyperinflation

An extreme form of inflation, hyperinflation occurs when prices increase by more than 1,000% annually. In such situations, the value of the local currency plunges, leading to significant economic disruptions.

Stagflation

A challenging economic condition, stagflation combines stagnant economic growth, high unemployment, and high inflation. It presents a tough challenge for policymakers since any measures to reduce inflation can further depress economic growth, and vice versa.

Recognizing these types of inflation can help us identify the current economic state and predict future trends. Effective policies can then be devised to ensure economic stability and growth.

What Is the Inflation Reduction Act?

The Inflation Reduction Act of 2022 (IRA) was passed by Congress to curb inflation. The law promotes domestic clean energy production, lowers prescription drug prices, and reduces the deficit.

You don’t have to be living under a rock to know that inflation seems to be getting out of control. We are seeing the cost of goods and services rise beyond what’s comfortable for most people—especially those living paycheck to paycheck. For people who are disabled or retired and living off a fixed income like Social Security, these changes can be disastrous.

Food items that were once affordable are now more expensive. Some shoppers may even have to take some items out of their cart. Prices at the pump have consumers shaking their heads. Couple this with the fact that American household debt already places a significant financial burden on many consumers, and the prospect of retirement does not seem appealing.

This is where the Inflation Reduction Act can help. Among the many things it promises, the IRA will create more fair-paying clean energy jobs while incentivizing sustainability for businesses. It makes the tax code fairer by cracking down on tax dodgers and big corporations in order to raise revenue for much-needed programs like federal student aid. It re-energizes the manufacturing sector, especially in the green energy space. And it lowers healthcare costs, especially in the area of prescription drugs, which is good news for those beneficiaries paying Medicare Part B premiums.

But in addition to all these wonderful selling points, the goal of the Inflation Reduction Act is to curb the rampant inflation that is plaguing our country. The cost of goods and services must stabilize, so fixed incomes go further. Remember that COLA or cost of living adjustments are applied to Social Security benefits when the CPI indicates a price increase.

The 2024 Social Security increase adjusts to the higher cost of living. Coupled with the long-term solution of the Inflation Reduction Act, things are looking better for seniors and disabled Americans who collect Social Security benefits.

2024 Social Security Increase

Inflation has caused the 2024 Social Security rates to increase again this year. This increase in benefits is meant to offset the rising prices that make it cost more to live. If someone is collecting retirement or disability benefits, and these benefits provide the bulk of their income, there is a decent chance that they cannot just magically increase their cash flow.

Using a credit card, even the best credit card with cash back, would put them into debt (and seniors tend to rank best in terms of average American debt by age). What they need is a change to the benefits they are getting in order to keep up with inflation. For Social Security recipients, the 3.2 % increase brings some much-needed relief.