The Truth About Medicare Part B Increases and Social Security Cost of Living Adjustments

When the news about a 3.2% cost of living increase to Social Security benefits for 2024 was announced, beneficiaries breathed a sigh of relief. But that relief was soon overshadowed by the revelation that Medicare Part B premiums would rise by 5.94% in the same year. At first glance, these numbers can paint a bleak picture. However, when you dive deeper into the figures, a different story unfolds.

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The 2024 Annual Increase to Social Security Benefits (COLA): Answers to the Big Questions 

In 2024, the annual increase to Social Security benefits (COLA) will be 3.2%. 

This adjustment will affect Social Security retirement, disability, and SSI payments. The updated amounts will take effect in December, with recipients seeing the increase in their January payments. Note: Due to January 1 being a holiday and the normal SSI payment date being the first of the month, SSI payments for January are always disbursed at the end of the previous December.

With this update to Social Security benefits for 2024, many recipients understandably have questions about what this means for them. From how the increase was determined to how it will be applied, to who actually will see a benefit increase, it’s essential to have clarity on these changes. Let’s dive into the most frequently asked questions about this year’s COLA and provide you with the answers you need.

How is the COLA calculated?

The Social Security Administration (SSA) annually calculates the Cost of Living Adjustment (COLA) based on inflation. To understand this process, it’s important to note that the SSA uses the CPI-W (Consumer Price Index for Urban Wage Earners and Clerical Workers) as the primary measure for inflation, which is supplied by the Bureau of Labor Statistics. Although the Bureau releases this data every month, the SSA only uses the numbers from the third quarter, encompassing July, August, and September. The data from this quarter in the current year is then compared to the same period in the previous year. Based on this comparison, if the current year’s CPI-W is higher, there’s an increase in Social Security benefits. However, if the CPI-W remains the same or drops, then there is no Cost of Living Adjustment for that year. 

How is the COLA applied to a benefit?

The way the Cost of Living Adjustment (COLA) is applied to Social Security might seem straightforward, but the actual method can give results that are slightly different from initial expectations. Instead of just increasing all the estimated benefit amounts for different ages by the announced COLA percentage, the adjustment is made to your primary insurance amount (PIA). The PIA is basically what you’d receive if you retire at the full retirement age. The adjustment starts with your PIA, and then factors in any increases if you decide to retire later or reductions if you opt for early retirement.Here’s how it works: Your PIA is first updated with the COLA. Then, depending on whether you retire early or late, reductions or increases are made. Once calculated, the amount is rounded down to the nearest dime. Lastly, any applicable deductions like Medicare Part B premiums are subtracted. This final number, once again rounded down to the nearest dollar, becomes your final benefit amount.

What age does the COLA start applying?

The Social Security publication titled “Your Retirement Benefit: How It’s Figured” succinctly addresses when the COLAs start applying to benefits. They say:  “You’re eligible for cost-of-living benefit increases starting with the year you turn age 62.” That seems clear, but the COLAs are commonly reported in such a way that makes it difficult to understand. For example, in October of 2021 the SSA announced a 5.9% COLA. In most publications and new reports, this was referred to as the “2022” COLA. There are places where even the Social Security Administration seems to refer to this as the 2022 COLA. This led many to think that if they turned 62 in 2022, the cost of living would apply to their benefit. That’s not accurate. Technically, the COLA announced in October of 2021 was the 2021 COLA. It was announced in 2021, and applied to benefits in December of 2021 (payable in January of the following year).  

If you look closely, there are multiple places where the SSA referred to this as the 2021 COLA while the rest of the world called it the 2022 COLA. 

Here’s the easiest way to remember this: The first COLA which will become effective is the one announced in the same year you turn age 62.

Do you have to be receiving benefits to get the COLA increase?

Whether you have filed for benefits or not, the Social Security COLA applies to your benefits starting with the one announced in the year you turn 62. 

The Social Security Administration has a piece that is very clear on this. It says, “You’re eligible for cost-of-living benefit increases starting with the year you become age 62. This is true even if you don’t get benefits until your full retirement age or even age 70. We add cost-of-living increases to your benefit beginning with the year you reach 62.” 

Now that’s very clear as to when it applies to retirement benefits, but it doesn’t mention survivor or disability. For that, we have to dig a little deeper into the Social Security website. 

Because these rules are often a bit convoluted, we actually have to reference two different rules. First, we find the rule on when the COLA is applied and according to their program operations manual systems, or POMS, (that’s the handbook for processing claims), they say Beneficiaries entitled to an AIME PIA or a Transitional Guarantee PIA are entitled to any COLA which occurs in or after the benchmark year.” 

Here’s the simplified interpretation of that. 

If you become entitled to benefits after 1978, you are entitled to any COLA which occurs in or after your benchmark year. 

This raises the obvious question…what is a benchmark year? For that, we turn to another section of this manual which defines the benchmark year for retirement, disability, and survivor benefits. 

  • For retirement benefits, the benchmark year is the year you turn 62. 
  • For survivor benefits, it’s the earliest of the year you turn 62 or the year of death. 
  • For disability benefits, it’s the earliest of the year you turn 62 or the year you become disabled. 

Note: There are some changes that could happen to the benchmark year for disability benefits if you are on receiving disability and then stop for at least a 12 month period before filing for retirement benefits. For the full rules on this, read section B of the POMS manual page. 

Staying informed about the annual changes to Social Security benefits is crucial for those depending on these payments. Beyond the COLA adjustment, there are also significant updates to the earnings limit, the benefits formula, and much more that can impact your monthly checks. To navigate these shifts, a reliable and concise resource is invaluable. This is where our Social Security Cheat Sheet comes in. We’ve distilled the extensive information from the official 100,000-page Social Security website into a manageable, two-page guide. By downloading this resource, you’ll have all the important insights at your fingertips. Plus, by staying subscribed to our email list, you’ll automatically receive the updated cheat sheet every year as soon as new data is released. Equip yourself with knowledge and clarity; click here to download our Social Security Cheat Sheet today.


Navigating the Process: How to File for Social Security

Deciding to file for Social Security is a significant milestone, marking the transition into a new phase known as retirement. This process can seem daunting due to its complexity. However, with a clear understanding of the steps involved, which we aim to give you in this comprehensive guide on how to file for Social Security, you can navigate this journey smoothly. 

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The Ultimate Social Security Filing Guide for Singles

Navigating the Social Security filing process as a single individual can be a daunting task. The considerations you need to make differ significantly from those of married couples. In this guide, we aim to simplify this process and provide you with the essential information you need before filing for Social Security. It’s crucial to get this right, especially as a single individual, as there’s no safety net of a spouse’s income or assets.

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Finding the Best Calculator for Social Security Retirement Planning: A Comprehensive Guide

Social Security benefits are a crucial component of retirement planning for millions of Americans. With numerous factors such as earnings history, age, and marital status influencing the amount of Social Security benefits one can receive, using a reliable calculator becomes essential in making informed decisions for a secure financial future. In this article, we will explore the best calculators for Social Security retirement planning and discuss their key features to help you find the right tool for your needs.

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Is Social Security Taxable? A Comprehensive Breakdown

With an increasing number of individuals relying on Social Security benefits as a significant source of income during their retirement, it is essential to understand the tax implications associated with these benefits. The Social Security system, created in 1935, is a social insurance program that provides financial assistance to retired individuals, people with disabilities, and survivors of deceased workers. The primary question many people ask is whether their Social Security benefits are taxable or not. The answer is not a simple yes or no; it depends on various factors, including your total income and filing status. This article provides a comprehensive breakdown to help you understand the taxability of Social Security benefits.

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Navigating Social Security Benefits When Divorced: What You Need to Know

Divorce can bring many financial challenges and uncertainties, especially for those nearing or entering retirement. One critical aspect that many individuals may not consider is how Social Security benefits will be affected after a divorce. This article will explore the complexities of Social Security benefits for divorced individuals, the criteria for eligibility, and tips for maximizing these benefits to ensure financial stability during retirement.

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The Debt Ceiling, Social Security, and the Washington Monument Ploy: Distinguishing Rhetoric from Reality

Social Security and the Washington Monument Plot


In the current political climate, the United States is wrestling with the implications of the national debt and the uncertainty surrounding the debt ceiling. A centerpiece of this discussion is the potential impact on Social Security—a lifeline for millions of American seniors and disabled individuals. Within this narrative, political tactics have been employed to sway public opinion and push forward certain policy objectives. Figures like Senator Chuck Schumer and Treasury Secretary Janet Yellen have utilized the Washington Monument Ploy to emphasize the potential disruption to Social Security. However, a deeper dive into the legislative framework reveals that the threat to Social Security might not be as immediate or dire as it appears, thanks to the Contract with America Advancement Act of 1996.

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The Social Security Payout Schedule: When and How You’ll Receive Your Benefits

Social Security benefits are a crucial financial resource for many retirees, disabled individuals, and surviving family members in the United States. The Social Security Administration administers these benefits and helps millions of Americans maintain their quality of life after retirement, during disability, or after losing a family member. This article will provide an overview of the Social Security payout schedule and insight into the process of receiving benefits.

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Is Social Security Running Out? Understanding the Future of America’s Retirement Safety Net

Social Security, established in 1935, has been a critical component of America’s social safety net, providing financial security for retirees, disabled individuals, and their families. As the program approaches its 100-year anniversary, concerns about whether social security is running out have become increasingly prominent in conversations. In the following paragraphs, we’ll discuss the current state of the Social Security program, explore factors affecting its solvency, and discuss potential solutions for ensuring its future.

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