Social Security Hikes Retiree Benefits 3.2% in 2024 - Watch Out in 10 Years if Congress Does Nothing

Mark Hake

The Social Security Administration said on Oct. 12 retirees will get a 3.2% cost of living adjustment (COLA) hike in their payments starting in January 2024.

This is based on the Department of Labor’s Consumer Price Index (CPI-W) monthly increases during Q3.

For example, the CPI-W rose 3.6% in September, after an increase of 3.4% in August and 2.6% in July on a non-seasonally adjusted basis. The average of these three was 3.2% (the SSA rounds down) for Q3. These figures for CPI-W can be downloaded as Excel spreadsheets from the Bureau of Labor Statistics archived data site.

Interestingly, if the monthly CPI-W continues at 3.6% over the next year it's possible that the 2025 increase could be higher.

Social Security Is Still Projected for a Deficit

The Chief Actuary and the Government Accounting Office still project that reserves will run out by 2034.

That will mean, based on a recent presentation by Steve Goss at the Conference for Consulting Actuaries, that drastic changes will be needed.

He says that Social Security benefits will have to fall by 25% or else the Social Security tax rate of 12.4% will need to rise by 33%.

Today, for most employees, half of that tax rate is paid by their employers - i.e., 6.2%. If the rate has to rise by 33% it will rise to 16.5%. That implies that most employees' Social Security rate will rise to 8.25% or so.

But again, this is only if Congress takes no action by 2034 in either reducing benefits or raising rates. It could also be a combination of both.

How That Works Out Over the Next 10 Years

So, let's say that Congress does nothing. By 2034 retiree benefits will be cut by one-third.

But, don't forget that inflation occurs each year. Let's say that it averages 3.5% over the next 10 years from 2024 to 2033.

That means that benefits will rise by slightly over 41% over the next 10 years (actually 41.06% since 1.035¹⁰ = 1.4106). This assumes the calculation is made on a cumulative basis.

So, after a 25% reduction starting in 2034, the level of benefits will still be 5.8% higher than they are this year.

Examples of How This Works

For example, let's say that a Social Security beneficiary gets $1,000 a month this year, or $12,000 annually. In 10 years they will get $1,410 per month, assuming inflation stays at 3.5% on average over the next 10 years. But, if Congress does nothing, after a 25% reduction, the monthly amount will be $1,057, or 5.7% more than this year.

For $2,000 per month now, the benefits will rise to $2,821 per month by 2033 at an average of 3.5% increase annually. After a 25% reduction, the benefit would drop to $2,115 monthly in 2034.

However, to be more conservative let's say that inflation averages just 2.5% annually over the next 10 years. That implies they will rise by 28% over the next 10 years. However, after a 25% reduction in 2034, this would result in a net drop of 4.0% compared to benefits this year.

So, for example, a monthly benefit of $1,000 would rise to $1,280 by 2033. But, in 2034, after a 25% cut, the benefits would fall to $960. That results in a $40 drop compared to the 10-year earlier benefits of $1,000 per month, or 4%.

For a $2,000 monthly benefit, the 2033 benefits, at a 2.5% average annual gain, would rise to $2,560. But in 2034, they would suddenly fall to $1,920, after a 25% cut in benefits, assuming Congress did nothing.

So, in effect, Social Security beneficiaries should hope that inflation stays above 2.6% to 3.0% annually.

That way, at least in 10 years, if Congress does not raise Social Security tax rates and their benefits are cut by 25%, at least they will be at the same level they are today or slightly higher.


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Mark R. Hake, CFA, writes articles on national and local news, stocks, and market events at,,, and as well as TalkMarkets.

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Mark Hake is a financial analyst, investor, and Chartered Financial Analyst (CFA). He writes about US and foreign stocks and wealth, financial, and economic issues. He previously ran his own hedge fund and investment research firm and is presently Chief Strategy Officer for Foldstar Inc. and

Phoenix, AZ

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