Each year, the Social Security Administration (SSA) adjusts the benefits that retirees receive to keep up with inflation. On October 12, 2023, the SSA released its official cost-of-living adjustment (COLA) announcement. Here's what you need to know.

The 2024 Social Security COLA Is 3.2%

Beginning with the December 2023 benefits that are payable in January 2024, Social Security payments will increase by 3.2% thanks to the COLA update. Let's be frank—this isn't as much as last year's record-setting 8.7% increase, which came to pass because of the blistering rate of inflation we all experienced in 2022. However, this year's adjustment is still substantial, increasing by more than $50 per month for the average retired worker.

Here's a breakdown of what the increase will look like for different types of beneficiaries:

• For the average retired worker, the benefit will increase from $1,848 to $1,907 per month.
• For married couples who both receive benefits, payments go from $2,939 to $3,033 per month.
• Widowed mothers with children will see an increase from $3,540 to $3,653.

Why Do Social Security Payments Increase?

The annual cost-of-living adjustment is indexed to CPI-W inflation to protect retirees' purchasing power. This index captures changes in prices of goods and services including food, housing, education, medical care, energy, and recreation—basically the types of things that retirees regularly purchase.

Social Security beneficiaries are typically notified about their new benefit amount by mail starting in early December. The fastest way to find out what you'll be receiving from the federal government next year is to access your personal Social Security account and view your COLA notice online. This method is easy and allows you to know your precise benefit before the mailed notice hits your mailbox.

Do I Need to Apply Now for Social Security Benefits to Be Eligible for the 2024 Cola Increase?

We get this question frequently, and the answer is no. There is no COLA-related reason to apply now for your Social Security benefits. If you're eligible for Social Security retirement benefits, you'll be able to start receiving them as soon as you reach age 62. Regardless of when you choose to start receiving those benefits, your monthly payment will include all cost-of-living increases.

Delaying benefits is an option to consider for anyone who may want to maximize their future benefits. While there's no COLA penalty for delaying, there are many other factors to consider and balance as you start planning your Social Security strategy.

Talk to a financial advisor about your Social Security strategy.

Medicare Changes for 2024

In addition to the Social Security COLA updates, retirees and near-retirees received some other important planning information in mid-October. On October 12, 2023, the Centers for Medicare and Medicaid Services (CMS) released their 2024 premiums, deductibles, and co-insurance amounts for Medicare Part A and Part B.

The 2024 Part B tables show an increase in standard monthly premiums of 5.9%. This increase, which translates to an approximately $10 monthly rise for individuals earning less than $103,000 if filing single, or $206,000 if filing jointly, is primarily attributed to projected hikes in health care spending. Keep in mind that monthly adjustments to premiums increase depending on income. For instance, high-income beneficiaries will see monthly premium adjustments ranging from about $70 to $420.

January 2023 Changes & Enrollment Simplification

In addition to these financial adjustments for 2024, it's important to remember the changes in enrollment and coverage that took effect earlier. Since the beginning of 2023, Medicare has implemented new rules to streamline the enrollment process and minimize coverage gaps.

Specifically, for individuals enrolling in the last three months of their Initial Enrollment Period or during the General Enrollment Period, Medicare coverage now begins the month following their enrollment. This change marked a significant shift from the previous guidelines, ensuring quicker access to benefits and less of a coverage gap.

This policy change also affected those enrolling at the age of 65. Under the new rule, if you sign up for Medicare in the month you turn 65, your coverage commences on the first day of the following month, eliminating the previous three-month waiting period. These adjustments were part of a broader effort to simplify the Medicare system and provide more timely health care coverage to beneficiaries.

How Can You Benefit From the 2024 Social Security COLA?

The COLA is an essential tool in safeguarding the financial well-being of millions of Americans who rely on these benefits for a substantial portion of their income. Meanwhile, the changes in Medicare highlight the government's commitment to adapting health care coverage to meet the challenges of rising costs and evolving needs. These updates serve as a healthy reminder that the most important part of leveraging your benefits is to stay informed about their changes.

Any shift in Social Security benefit amounts and Medicare premiums can cause a ripple effect of changes across your financial plan. As we look towards 2024 and beyond, understanding these changes and their impacts on your overall retirement plan is crucial. If you have questions about how you can maintain your quality of life during your golden years, reach out to a Wealth Enhancement Group financial advisor for a free introductory meeting and get your plan started today.