As we enter the second month of the year, Social Security beneficiaries in the United States are interested in knowing the dates of payments to alleviate their financial situations.
It is important to note that effective January 1, 2024, all Social Security checks experienced a notable increase due to the cost-of-living adjustment, which reached 3.2%.
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The Cost of Living Adjustment (COLA) ensures that the purchasing power of Social Security benefits keeps pace with inflation. This calculation is made considering the percentage increase in the Consumer Price Index for Wage Earners and Urban Employees (CPI-A) from the third quarter of last year to the third quarter of this year.
According to the Social Security Administration (SSA), average payments for all retirees will increase from $1,848 to approximately $1,907.
Increase in next Social Security payment
In the United States, retirement can be divided into three parts. We can apply for retirement at age 62, at age 67 and at age 70. But if you want to get as much money as possible, it is best to delay the retirement age.
Retired workers can apply for their monthly Social Security benefits at age 62. This reduces the amount of money you get by not waiting until full retirement age (age 67). The amount you would get would be equal to the full amount of the retirement benefit you are entitled to, minus a 30% reduction.
If your full retirement benefit at age 67 is $1,000 but you get benefits at age 62, you will get $700 per month instead.
Waiting longer to get benefits may increase your benefit amount. If you decide to delay benefits until age 70, the maximum age you can wait to claim them, then a monthly benefit of $1,000 would become $1,240 per month. That’s because you get an additional 8% in benefits for each year you delay them from full retirement age.
How is the cost-of-living adjustment (COLA) calculated?
The cost-of-living adjustment (COLA) is typically calculated using the following steps:
- Selection of a Price Index: The Consumer Price Index (CPI) is commonly used to measure changes in the prices of goods and services.
- Determination of Reference Periods: The price index is compared between two periods, such as the current year and the previous year.
- Calculation of Percentage Change: The percentage change in the price index reflects the inflation rate and is calculated.
- Application of COLA: This percentage is applied to income or benefit amounts to adjust for the cost of living.
- Implementation and Timing: COLA adjustments can be annual or more frequent, depending on the policy of the implementing entity.
The specific formula and criteria for COLA can vary by organization or government agency.