If you’re retired or planning to retire soon, you may need to know, “how much is the cost of living increase for Social Security in 2024?” In comparison to earning a substantial income from a full-time job, living on a fixed income from Social Security benefits can be challenging. It’s important to know how much your monthly benefit check will be and how yearly cost of living increases may impact your future earnings.
Social Security Benefits in Illinois
Social Security benefits in Illinois and other states are based on your work history and your retirement age. When you work and pay into Social Security, you earn credits toward Social Security benefits. The length of time that you need to work to earn enough credits depends on whether you are seeking benefits based on retirement or disability, and your age at the time of retirement or disability.
The number of credits you need to get Social Security retirement benefits depends on when you were born. If you were born in 1929 or later, you need a total of 40 credits, or 10 years of work, to qualify. You can apply for Social Security retirement benefits when you reach age 62, but your monthly benefits will be less than if you wait to reach your full retirement age of 66. Your full retirement age also varies based on when you were born. If you were born between 1943 and 1954, the SSA considers you fully retired at age 66. If you were born between 1955 and 1959, your full retirement age of 66 increases by 2 to 10 months. If you were born in 1960 or later, your full retirement age jumps to 67.
You can apply for your monthly retirement benefits any time between the ages of 62 and 70. The Social Security Administration (SSA) looks at your age when you apply and calculates your Social Security benefit payment by looking at how much money you have earned throughout your lifetime. If you wait until age 69 or 70 to apply, your monthly benefits will be higher. However, when you apply is up to you, and the timing should be based on your personal needs and finances.
In Illinois, a Social Security disability attorney can explain how much the cost of living increase for Social Security is and how it may impact your monthly benefits. Your attorney can also help with advice on when to apply for benefits, how to file a claim, and what impacts your eligibility. In Illinois, you may be eligible for Social Security benefits if you fall into one of the following categories:
- A retired or disabled worker
- The spouse of a worker receiving benefits
- The widow of a deceased worker
- The dependent child of a worker receiving benefits
- The surviving dependent child of a deceased worker
- A low-income person who has a disability, or is blind, or is aged 65 or older
What Are Cost of Living Adjustments (COLAs)?
What is Social Security COLA? The cost of living adjustments, referred to as COLAs, are annual Social Security general benefit increases. Before 1975, these annual increases in Social Security benefits were set by legislation. Beginning in 1975, Social Security’s general benefit increases have been based on increases in the cost of living, as measured by the Consumer Price Index. Currently, COLAs are re-assessed every year and benefit increases are payable to Social Security recipients each year in December.
COLAs have an impact on Social Security’s Old-Age, Survivors, and Disability Insurance (OASDI) programs, as well as the Supplemental Security Income (SSI) program. COLAs provide annual increases in payments from OASDI and SSI programs. The national average wage index is used to determine earnings for initial benefit computations and several wage-indexed amounts that impact the OASDI program.
How Does COLA Impact Your Social Security Benefits?
People who receive monthly Social Security benefits get yearly increases in their benefits based on cost-of-living adjustments. COLAs are based on several factors, including the national wage index, increases in the cost of living, and the state of the economy. During the COVID-19 pandemic, the economy took a big hit. With stay-at-home orders and social distancing, many people lost their jobs or chose to work from home. In 2021, the impacts on COLA were significant, with a zero increase in Social Security benefits.
How Is COLA Calculated?
The Social Security Act specifies a formula that is used to determine yearly COLAs. According to the formula, COLAs are based on increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). CPI-Ws are calculated monthly by the Bureau of Labor Statistics.
A COLA effective for December of the current year is equal to the percentage increase (if any) in the CPI-W from the average for the third quarter of the current year to the average for the third quarter of the last year in which a COLA became effective. If there is an increase, it must be rounded to the nearest tenth of one percent. If there is no increase, or if the rounded increase is zero, there is no COLA for the year.
Cost of Living Increase for Social Security in 2024
How much is the cost of living increase for Social Security in 2024? The cost-of-living adjustment for 2024 is set at 3.2%. To calculate your monthly increase, you can multiply your current Social Security payment by the new percentage. For example, if your current Social Security benefits for 2023 are $1,260 per month, the 3.2% COLA for 2024 will increase your benefits to $1,300 per month, an increase of $40 each month. If your current benefits are $1,500 per month, your benefits will increase to $1,548, an increase of $48 each month. Cost of living increases (COLAs) are set every year based on various economic factors and cost of living increases.
If you receive Supplemental Security Income (SSI benefits), your monthly benefits will also increase by 3.2%. The monthly maximum Federal amounts for 2024 are $943 for an eligible individual, $1,415 for an eligible individual with an eligible spouse, and $472 for an essential person. Monthly amounts for the next year are determined by increasing the annual amounts for the current year by the COLA effective for January of the next year.
Factors Influencing the Cost of Living Increase
One of the main factors that influence the cost of living increase (COLA) is inflation. Over the last two years, Americans have seen a significant rise in the costs of homes, groceries, utilities, and many other things. After spending for more than two decades below 3%, the consumer price index (CPI), a key measure of U.S. inflation, nearly tripled from 2020 to 2021, rising from 1.4% to 7.0%. In June 2022, inflation peaked at an annual rate of 9.1%.
Preparation for the Cost of Living Increase
Inflation and the cost of living are intertwined. Inflation represents an increase in prices, while the cost of living represents a snapshot of how much a person needs to spend at any given moment in time. When inflation rises, the costs of goods and services also rise. This can create challenges for people on fixed incomes, especially for necessities like housing, food, medications, and transportation.
If you receive Social Security benefits, SSI benefits, or Social Security disability benefits, you should know how much \the cost of living increase for Social Security is and how your benefits may be affected. Finding out this information ahead of time will help you prepare for next year’s financial goals and expenses.
Navigating Cost of Living Increases for Social Security Benefits in Illinois
The cost of living is how much it costs to maintain a certain standard of living in a given place and time. It’s usually calculated by averaging the costs of goods and services required to meet that standard of living. The government uses regional and national data to determine the cost of living in specific areas of the country.
In Illinois, people can look forward to the benefits increase coming soon. The 3.2% cost-of-living adjustment (COLA) will begin with benefits payable to more than 66 million Social Security beneficiaries in January 2024. Increased payments to approximately 7.5 million SSI recipients will begin on December 29, 2023. This 3.2% increase will make a measurable difference to Illinois residents, especially for 46.6% of people aged 65 and older in Illinois who rely on Social Security for 50% or more of their income, and for the 22.5% of people aged 65 and older who rely on Social Security for 90% or more of their income.
