While it’s not nearly as high as the massive, inflation-fueled adjustment in 2023, Social Security recipients will still receive a modest cost-of-living adjustment (COLA) for 2024.
This morning, the Social Security Administration (SSA) announced that Social Security and Supplemental Security Income (SSI) benefits for more than 71 million Americans will increase 3.2% in 2024.
On average, Social Security retirement benefits will increase by more than $50 per month starting in January. More than 66 million Social Security beneficiaries will see the 3.2% COLA beginning in January 2024. Increased payments to approximately 7.5 million people receiving SSI will begin on Dec. 29, 2023.
Retirement Savers
As for retirement savers, the modest boost in the COLA will carry through to a number of benefits and contribution limits of retirement plans.
Using Internal Revenue Code and Consumer Price Index information, Mercer projected that the contribution limits for 401(k), 403(b) and eligible 457 plan elective deferrals (and designated Roth contributions) may increase from $22,500 at present to $23,000 in 2024.
The 415(c) DC plan maximum annual addition is projected to increase from $66,000 to $68,000, and the highly compensated employee and top-paid group limit is projected to be $155,000 in 2024, compared with $150,000 for 2023. Mercer noted that the 415(c) limit could increase to $69,000, but that’s if there was significant inflation in August and September. We’ll have to wait and see what the Internal Revenue Service says—later this month or possibly in early November.
Wage Base and Earnings Limits
The Social Security Act ties the annual COLA to the increase in the Consumer Price Index as determined by the Department of Labor’s Bureau of Labor Statistics.
Some other adjustments that take effect in January of each year are based on the increase in average wages. Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $168,600 from $160,200.
The earnings limit for workers who are younger than "full" retirement age (see Full Retirement Age Chart) will increase to $22,320. Note that the SSA deducts $1 from benefits for each $2 earned over $22,320.
The earnings limit for people reaching their “full” retirement age in 2024 will increase to $59,520. Similarly, the SSA deducts $1 from benefits for each $3 earned over $59,520 until the month the worker turns “full” retirement age.
There is no limit on earnings for workers who are "full" retirement age or older for the entire year.
The SSA will begin notifying people about their new benefit amount by mail starting in early December. People will need to have a my Social Security account by Nov. 14 to see their COLA notice online. Information about Medicare changes for 2024 will be available at www.medicare.gov.
To read more about the 2024 COLA, please visit www.ssa.gov/cola.
