Under a formula set by Congress, Social Security recipients will see their benefits increase by 3.2% in 2024.
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Social Security benefits will increase 3.2% in 2024 for the nation’s 71 million beneficiaries, bringing the average monthly check for a single retiree to $1,907, up $59 from $1,827 this year. and for a retired couple both receiving benefits at $3,033, up $94 from 2024. $2,939 this year, the Social Security Administration announced today. This is a slight increase from the 8.7% cost of living adjustment (COLA) for 2023 (the largest since 1981, as shown in the chart below) and reflects the shock absorber that was put on inflation.
According to the law, the 2024 COLA is based on the increase in the Consumer Price Index for Urban Wage Earners (CPI-W) between the third quarter of 2022 and the third quarter of 2023, which means it examines the inflation back and was set this morning when the Bureau of Labor Statistics reported the September inflation rate. Current beneficiaries should receive notices in the mail in early December with their new individual benefit amounts for 2024, but can get this information sooner by creating an individual account. online account and sign up to receive a text or email alert. Automatic Social Security COLAs have been in place since 1975, when Congress decided to opt out — along with political pressures at the time — of an annual adjustment affecting so many voters.
The SSA also said today that the maximum amount of earnings subject to Social Security tax (also known as wage base) will increase to $168,600, up 5.2 percent from 160 200 base 2022 dollars. This adjustment, which means higher taxes of about 6%. of workers, is based on changes in the national average wage index, not the CPI. The Social Security tax rate set by Congress is itself unchanged at 12.4%, with the worker and employer each paying half and the self-employed themselves paying the full 12.4%. . This means that the maximum Social Security tax per worker will increase by $1,041.60 to $20,906.40, of which $10,453.20 will be taken directly from the employee’s salary, up from $9,932.40 This year.
The maximum benefit for a high-income single worker claiming Social Security at “full” retirement age will be $3,822 per month in 2024, up from a maximum of $3,627 in 2023. But the maximum benefit Actual increases and decreases depending on the age at which a worker claims. For example, someone born in early 1958 will reach full retirement age, 66 and 8 months, at the end of 2024. But if they wait until age 70 to file for retirement, their monthly benefits will be 27% higher . This “delayed retirement credit” is equivalent to two-thirds of 1% per month for each month of delay beyond full retirement age, or 8% per year. There is no benefit to waiting beyond age 70. Those who wait until after full retirement age to apply do not lose the benefit of annual COLAs; instead, the annual COLA is used to adjust a beneficiary’s benefit at full retirement age (also known as the “primary insurance amount”) before being multiplied by the delayed retirement credit.
Another key set of automatic adjustments released today, this one based on the wage index, is the amount those who applied for Social Security retirement benefits before full retirement age can earn from employment or self-employment without having their benefits reduced. Workers can receive reduced retirement benefits at age 62, and about 30% Americans do it. But the full retirement age is 66 for those born between 1943 and 1954 and increases by two months per year until reaching 67 for those born in 1960 or later, who take a 30% reduction in monthly benefits if they apply at age 62.
In 2024, most of those who take Social Security early will lose $1 in benefits for every $2 of income above $22,320, or $1,860 per month, compared to $21,240 per year, or $1,770. per month in 2023. Those reaching full retirement age in 2024 will have a more generous earnings limit. They will be able to earn up to $59,250 ($4,960) per month in the period before full retirement age and will only lose $1 in benefits for every $3 earned above the limit . The income test has become more important as the full retirement age increases and the percentage of older workers in the workforce, which fell sharply at the start of the Covid pandemic, continues to recover. (Note that the career penalty is not as bad as it seems, since Social Security recalculates your benefits when you reach full retirement age to account for any amounts you lost before that date because you applied early, but still worked.)
Amid this avalanche of numbers, a crucial monetary adjustment affecting retiree finances has yet to be released by the federal government: the Medicare Part B premium for 2024, a figure that the Centers for Medicare and Medicaid Services (CMS) should be released today or tomorrow. , since open registration period for 2024 Medicare coverage begins October 15th. (During open enrollment, beneficiaries can switch between traditional Medicare and Medicare Advantage, or change Medicare Advantage plans.)
In 2023, the premium for Part B decreased for the first time in more than a decade, from $170.10 to $164.90 for retirees who are not subject to a high-income surcharge, after jumped 14.5% in 2022. get a modified adjusted gross income of $97,000 or more for an individual, or $194,000 for a couple, and increase in stages, the highest premium being received from an income of $500,000 for a single person or $750,000 for a couple. The Higher Income Adjustment increased Part B premiums in 2023 to $560.50 per person per month, meaning a wealthy retired couple could pay $13,452 per year.
Part B premiums are expected to rise this year, in part because of the cost of a newly approved drug, Leqembi, which in a Phase 3 trial was found to slow the progression of memory loss and disorders cognitive impairment in patients with early-stage Alzheimer’s disease that Medicare has decided to cover. (The premium increase in 2022 and reduction in 2023 were partly related to the FDA’s controversial 2021 approval of an earlier and also expensive Alzheimer’s drug, Aduhelm, which Medicare ended up covering for clinical trial purposes only.)
Leqembi, which is administered by infusion in hospitals, clinics and doctors’ offices, is covered under Part B, not Part D, which covers medications taken at home. CMS said last month that Part D premiums were expected remain stable in 2024, with the average premium down 1.8% to around $55.50. Additionally, changes to drug coverage enacted in the Inflation Reduction Act of 2022 will reduce out-of-pocket drug costs for some beneficiaries, for example by reducing the cost of insulin and eliminate the co-pay for those whose “catastrophic” medications cost more than $8,000.
Medicare Advantage plans, also known as Part C plans, cover both Part B and Part D drugs and may charge an additional amount above the regular Part B premium, although all don’t do it. CMS screened last month that the additional Medicare Advantage premium will average $18.50 in 2024, compared to $17.86 in 2023.