Social Security Cost-of-Living Adjustment for 2024

The pace of inflation has slowed from last year’s dramatic jump in prices, but that doesn’t mean the pain of paying more at the cash register for everything from gas to groceries has disappeared. Fortunately for retirees, the Social Security Administration adjusts benefits yearly through its annual Cost-of-Living Adjustment (COLA) to help preserve the spending power of benefits. The administration announced recently that benefits checks will increase by 3.2 percent for 2024—smaller than last year’s increase but still above the 2.6 percent average rate over the past 20 years.

Here’s a look at how much retirees’ average monthly checks will go up in 2023—and other adjustments to the program.

What to expect if you’ve already claimed Social Security

More than 71.2 million people receive monthly benefit checks from the Social Security Administration, according to the latest government estimates. Of those, nearly 64 million are Social Security recipients, and another 7.5 million receive Supplemental Security Income. Some receive both forms of payments.

On average, Social Security recipients received about $1,707 per month in benefits for 2023, according to the latest monthly data from the Social Security Administration. For 2024, that figure is expected to grow by nearly $55 each month to $1,762. The increase amounts to $660 in additional benefits for the average recipient in 2024 compared to this year.

The maximum Social Security benefit for a worker retiring at full retirement age is increasing to $3,822 per month in 2024, up from $3,627 per month in 2023.

Changes if you’re still in the workforce

There’s also a change that affects those of us still in the workforce. When you’re in the workforce, you pay 6.2 percent in Social Security tax; your employer also kicks in about 6.2 percent. Self-employed workers pay the full 12.4 percent. However, the taxes apply to only to a certain amount of income. For 2024, the maximum amount of pay that’s subject to Social Security tax will increase by 5.2 percent to $168,600, up from $160,200 for 2023.

Things to consider when claiming your Social Security

While you can start claiming Social Security benefits beginning at age 62, you must be at your full retirement age (FRA) (between 66 and 67, depending on when you were born) in order to receive 100 percent of your benefit. Additionally, for every year that you delay receiving these funds after your FRA up to age 70, you’ll receive an 8 percent bump in your monthly benefit, which will remain in place for the rest of your life.

Of course, when to file for Social Security benefits isn’t solely a financial decision and varies for everyone. Whether it’s health issues or a late-career job loss, you may find yourself needing to retire before turning 67. Or perhaps you want to travel when you’re relatively young and healthy and expect your financial needs to be more modest in your later retirement years. On the flip side, maybe you love your work and don’t have any plan to retire. Or if you already started receiving benefits but find that you can cover expenses by other means, you also have the option to suspend Social Security until age 70. These are all important considerations when it comes to deciding when to claim your Social Security benefit.

Social Security is just one part of a larger financial plan

Social Security is typically a critical base of income for retirees because it’s guaranteed and unaffected by swings in the market. But for most people, it’s just one part of a larger plan that’s designed to help you create reliable income while protecting against many known risks, including inflation. The guaranteed, stable payments from Social Security tend to pair well with other financial tools like investments, which can help to grow your wealth over time—but can be volatile in the short term.

Additional tools, such as income annuities, working alongside Social Security reduce volatility in a financial plan and can help protect you from running out of money in retirement should you live longer than you expect. Additionally, whole life insurance can help protect your financial plan against volatility while preserving your legacy. Your cash value is essentially another cash reserve (that’s unaffected by market swings and likely to grow more than money sitting in a checking account) because you can access it at any time¹. In addition, the death benefit will allow you to be more deliberate about your legacy.

While the decision of how to use each of the above options may seem daunting, a Northwestern Mutual financial advisor can help you design a plan to get the most out of your assets during retirement. Just know that if you have a comprehensive retirement plan, you should feel confident that Social Security is just one of many threads that make up your retirement safety net.