As we approach the year 2024, many people receiving Social Security Disability Insurance (SSDI) benefits are eager to know how their benefits will be affected. One important aspect to consider is the SSDI cost of living increase for 2024. This annual adjustment is meant to help offset the impact of inflation on the purchasing power of those receiving disability benefits.
In this blog post, we will discuss everything you need to know about the SSDI cost of living adjustment (COLA) increase for 2024 and how it may impact those receiving SSDI benefits.
The 3.2% 2024 COLA will begin with benefits payable to more than 66 million Social Security beneficiaries in January 2024. Increased payments to approximately 7.5 million SSI recipients will begin on December 29, 2023. In 2023, the COLA was 5.9%, the largest increase in 40 years. Social Security and Supplemental Security Income benefits will increase by 3.2 percent in 2024.
Understanding Social Security Disability Insurance
Social Security Disability Insurance is a vital program that provides financial assistance to people who are unable to work due to a disability. Understanding the basics of SSDI is essential for anyone receiving or planning to apply for these benefits.
To qualify for SSDI, individuals must have a qualifying disability that is expected to last for at least a year or result in death. Additionally, applicants must have earned enough credits through paying Social Security taxes to be eligible. These credits are based on the individual’s work history and vary depending on their age at the time they became disabled.
SSDI benefits are calculated based on the individual’s average lifetime earnings before their disability began. The Social Security Administration (SSA) uses a complex formula to determine the monthly benefit amount, taking into account the individual’s average indexed monthly earnings (AIME). This AIME is calculated by adjusting the individual’s past earnings for inflation.
Once approved for SSDI benefits, individuals will receive monthly payments that are meant to replace a portion of their lost income. These payments can be crucial in helping them cover basic living expenses and maintain a normal standard of living despite their disability.
It is important to note that receiving SSDI benefits does not automatically make someone eligible for other government assistance programs, such as Medicaid or Supplemental Security Income (SSI). Eligibility for these programs is determined separately and may require additional criteria to be met.
By understanding the basics of SSDI, individuals can make informed decisions about their financial planning and ensure they are taking advantage of all the benefits available to them.
In the following sections, we will delve deeper into how SSDI cost of living adjustments are determined, how they can impact your financial planning, and more.
The Basis for SSDI Cost of Living Adjustments (COLAs)
Social Security Disability Insurance recipients eagerly await the annual cost of living adjustment to their benefits. But have you ever wondered how this adjustment is determined? Next, we will delve into the basis for SSDI COLAs.
The Social Security Administration uses a specific formula to calculate the COLA for SSDI benefits. The primary factor considered is the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This index measures the changes in the prices of goods and services over time and reflects the inflation rate experienced by wage earners and clerical workers in urban areas.
To determine the COLA, the SSA compares the average CPI-W for the third quarter (July to September) of the current year to the average CPI-W for the third quarter of the previous year. If the average CPI-W has increased, SSDI beneficiaries can expect a COLA to their benefits. The amount of the COLA is typically equal to the percentage increase in the average CPI-W.
However, it’s important to note that not every year sees a COLA increase. If there is no increase in the CPI-W, there will be no COLA for that year. This has happened several times in the past, most recently in 2016 and again in 2021.
Additionally, it’s essential to understand that the COLA is applied to the current benefit amount, not the original benefit amount. This means that if you are already receiving SSDI benefits, the COLA will increase your monthly benefits based on the current amount you are receiving.
Understanding the basis for SSDI COLAs can help recipients better prepare for potential adjustments to their benefits. By staying informed about the inflation rate and changes in the CPI-W, individuals can make more informed financial decisions and adjust their budgeting accordingly.
2024 SSDI COLA
As we look ahead to 2024, many people receiving Social Security Disability Insurance benefits are curious about the potential COLA for the upcoming year.
To determine the COLA, the SSA compares the average Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the third quarter of the current year to the average CPI-W for the same period in the previous year.
In 2023, the COLA was 5.9%, the largest increase in 40 years.
Social Security and Supplemental Security Income benefits will increase by 3.2 percent in 2024. The 3.2% COLA will begin with benefits payable to more than 66 million Social Security beneficiaries in January 2024. Increased payments to approximately 7.5 million SSI recipients will begin on December 29, 2023.
It is important for people receiving SSDI benefits to stay informed and monitor any updates from the SSA regarding the COLA for 2024 and other updates. By keeping an eye on economic indicators and staying educated about the factors that influence the COLA calculation, beneficiaries can make informed financial decisions and adjust their budgeting accordingly.
Increase in Maximum Social Security Benefits
As anticipated, because of the changes expected in 2024, the highest Social Security benefit you can get when you retire at full retirement age will also go up in 2024. It’s increasing from $3,627 to $3,822. It’s worth mentioning that this highest amount is for people who retire at the full retirement age, which is 67 for anyone born after 1960.
If you retire before reaching the full retirement age, your maximum benefits will be less because benefits are reduced in that case. In some cases, waiting to retire until after your full retirement age can help you get a bigger benefit check.
Increase in Spousal Benefits
In 2024, the average Social Security benefits will go up for various groups of people, including widows, widowers, and those with disabilities. Here’s a breakdown of those changes:
- The typical widowed mother raising two children will see her benefits increase from $3,540 to $3,653.
- Elderly widows and widowers who live on their own will experience a boost in their benefits, going from $1,718 to $1,773.
- Disabled workers supporting a spouse and one or more children will have their benefits increase from $2,636 to $2,720.
Keep in mind that these figures represent averages, and depending on your circumstances, they may lead to different benefit amounts.
Financial Impact of SSDI’s COLA
The Social Security Disability Insurance cost of living increase can have a significant impact on your financial planning. This annual adjustment is meant to help offset the impact of inflation on the purchasing power of your disability benefits. Understanding how the COLA can affect your financial situation is crucial for making informed decisions and maximizing the benefits available to you.
First, the SSDI COLA can provide some relief against the rising cost of living. As prices for goods and services increase over time, your monthly benefit amount may not stretch as far as it used to. The COLA ensures that your benefit amount keeps pace with inflation, helping you maintain your standard of living despite the rising costs.
The COLA can also impact your long-term financial planning. If you have a disability that is expected to last for a considerable period, you need to account for potential changes in your benefit amount over time. By understanding how the COLA is calculated and staying informed about changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), you can better anticipate and plan for adjustments to your benefits.
Additionally, the COLA can affect other aspects of your financial situation, such as eligibility for certain government assistance programs. An increase in your monthly benefit amount may impact your eligibility for programs like Medicaid or Supplemental Security Income.
It’s important to stay informed about any changes in eligibility criteria and make necessary adjustments to your financial planning accordingly.
To make the most of your SSDI benefits and the COLA increase in benefits, it’s essential to have a comprehensive Social Security Disability financial plan in place.
How the 2024 COLA Affects Social Security Disability Benefits
SSDI benefit amounts play a crucial role in the financial stability of individuals receiving Social Security Disability Insurance benefits. The annual cost of living adjustment is an essential factor that affects these benefit amounts.
According to the Social Security Administration, the 2024 COLA will increase the average monthly SSDI benefit for a disabled worker by $48, from $1,489 to $1,537, starting in January 2024. This increase aims to help individuals keep up with the rising cost of living.
In addition to benefiting disabled workers, the 2024 COLA will also impact family members who receive SSDI benefits on the earnings record of a disabled spouse, former spouse, or parent.
The average collected benefit for a disabled worker with a spouse and child receiving benefits on their record will increase from $2,636 a month to $2,720 in January 2024.
It’s important to note that there are income limits for SSDI recipients. Social Security sets an income ceiling, known as substantial gainful activity (SGA), to determine eligibility. In 2024, most SSDI recipients will be able to earn up to $1,550 a month from work without risking their benefits. This cap is higher for beneficiaries who are blind, allowing them to earn up to $2,590 a month.
To support individuals with disabilities who want to explore work options, Social Security offers work incentives, including a trial work period.
In 2024, the SSA will count a month toward the trial work period quota if the recipient earns at least $1,110, providing more flexibility and opportunities for individuals to increase their income while still receiving benefits.
SSI
Supplemental Security Income is a program that provides monthly benefits to individuals who are 65 or older, blind, or have a disability, have very low income, or may have limited financial resources.
While SSI is different from traditional Social Security benefits, it is still administered by the Social Security Administration.
With the 2024 COLA, the maximum federal payment to a person who receives SSI benefits will increase from $914 per month to $943. It’s important to note that some states also provide supplemental payments to some SSI beneficiaries, which can further increase the total benefit amount.
In 2024, for a married couple in which both spouses are eligible for SSI, the maximum monthly payment will rise to $1,415, compared to $1,371 in the previous year.
SSI benefits are typically paid on the first of the month. However, when the first falls on a federal holiday, such as January 1, recipients receive their first COLA-boosted payment on the prior business day. For the 2024 COLA, SSI recipients can expect their increased payment on Friday, December 29.
It’s important to understand that individuals receiving SSI may also have additional income from sources such as work, government benefits, investments, or support from family members. In these cases, a portion of the income is deducted from the monthly SSI payment, known as “countable income.” If the countable income exceeds the 2024 federal payment standard of $943 for individuals or $1,415 for couples, the individual or couple will not receive an SSI benefit for that month.
Knowing how the 2024 COLA affects SSI benefits is important for individuals who rely on these benefits. Understanding the maximum federal payment amounts and the income limits can help recipients plan their budgets accordingly and ensure they make the most of their financial resources.
