Social Security 2024 Cost-of-Living Adjustment (COLA) Increase: What It Is, How It’s Calculated

The Social Security cost-of-living adjustment (COLA) for 2024 is 3.2%. In 2023, the Social Security COLA was 8.7%. A cost-of-living adjustment (COLA) is a change in benefits based on changes in the prices of goods and services. The Social Security Administration calculates and applies COLAs annually to beneficiary payments.

The Social Security 2024 COLA increase takes effect in January 2024 and translates to an average increase of $59 per month for people receiving Social Security retirement benefits. The Social Security COLA also affects Social Security Disability Insurance (SSDI) payments and Supplemental Security Income (SSI) payments.

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Supplemental Security Income (SSI) beneficiaries might receive updated payments in December, but retirees and beneficiaries of other Social Security programs such as Social Security Disability Insurance (SSDI) typically don't see COLA adjustments in their checks until January. This is because Social Security typically pays benefits a month after they are approved.

• You don’t have to do anything to receive the Social Security 2024 COLA increase. The SSA calculates COLAs annually and applies them to Social Security benefits automatically.

• If the SSA doesn’t approve a COLA for a given year, your benefits stay the same.

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Every year, the Social Security Administration publishes a report that includes estimates of what future COLA amounts might be ^[0]

The SSA usually announces the actual COLAs in October. The agency calculates COLA following the end of the third quarter each year. This is because the SSA compares the third quarter’s average CPI-W to the third-quarter average of the last year a COLA was approved to calculate the adjustment rate.

Here are the SSA's most recent guesses.

A Social Security COLA is based on changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W)^[0]

• This specific index focuses on categories of goods and services that are most likely to affect families earning at least half their income from hourly-wage or clerical jobs. 

• An increase in the CPI-W indicates that inflation is on the rise. And that means the SSA needs to adjust benefit payments to help recipients afford basic expenses.

To calculate a COLA, the SSA compares the average CPI-W for the third quarter of the current year to the average CPI-W for the third quarter of the last year when a COLA was approved.

• If the average CPI-W has increased by more than a tenth of 1%, the SSA will approve a COLA, meaning it will increase benefits. 

• Your benefit increases by the percentage change in the average CPI-W. So if the average CPI-W increases by 3.1%, your benefit increases by 3.1%.

• If there is no change in the average CPI-W, or the CPI-W rate actually decreased, the SSA will not approve a COLA.

For example, here are the CPI-W readings for the third quarters of 2003 and 2004^[0]

Because the average CPI-W in the third quarter of 2004 is higher than the average CPI-W in the third quarter of 2003, the SSA provides a cost-of-living adjustment. The COLA equals the percent difference in the two CPI-W averages, which in this case is 2.66%. The Social Security Administration rounds it to the nearest tenth of a percent, so in this case the COLA is actually 2.7%.

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The Social Security COLA applies to a person’s primary insurance amount (PIA), which is the monthly retirement benefit a person receives if they apply for benefits at full retirement age. Retiring early or delaying retirement can change the amount of your PIA.