Gifts, happiness, and lots of surprises are what the holiday season is all about. There is a very special gift coming from the Social Security Administration this year for retirees.
The annual cost-of-living adjustment (COLA) for Social Security means that retirees will get more money in their benefits. For many, this could mean getting a big check in the mail. That check could be as much as $4,873 for some people, just in time for Christmas.
The COLA adjustment means that many people who get Social Security will get a bigger monthly check in December.
This is because the adjustment is meant to keep up with inflation and the rising cost of living. Find out everything you need to know about this much-needed money boost.
The $4,873 Social Security Check: Who Gets It?
The largest amount of money a retiree could get is $4,873, but not everyone will get that much. How much money you get from Social Security depends on a lot of things, like how much you have earned over the years and when you start getting benefits.
- Average Social Security Payment: The average Social Security payment for a retired worker in 2023 is about $1,800 per month, according to the Social Security Administration. However, this amount varies based on how much you earned during your career and the age at which you begin receiving benefits.
- Maximum Social Security Benefit: The maximum monthly Social Security benefit a retiree can receive in 2023 is $4,555 if they begin taking benefits at their full retirement age (FRA). For those who delay claiming until age 70, that number can increase to $4,873 per month. This is the highest amount available, but it requires years of high earnings and waiting to claim benefits until the age of 70.
What’s Behind the $4,873 Check?
The COLA increase is determined by the annual inflation rate, which is measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
In 2023, due to rising inflation, the Social Security Administration announced a COLA adjustment of 8.7% for 2024—one of the largest adjustments in recent history.
This increase is meant to help beneficiaries keep up with the higher costs of goods and services, such as food, housing, and healthcare, which have surged over the past year.
For retirees who have been relying on a fixed income, this adjustment is a welcomed relief. The COLA increase means more money in the bank, which can help alleviate some of the financial strain caused by inflation.
When Will the Checks Arrive?
Usually, the Social Security Administration starts to process COLA increases in December.
If you are already getting Social Security benefits, the extra money could show up in your bank account as early as December 2024 if you are already getting benefits. Your Social Security check could come early or late in the month, depending on when you were born.
Here is a general outline of when Social Security payments are made:
- If your birthday falls between the 1st and 10th of the month, your payment will be made on the second Wednesday of the month.
- If your birthday falls between the 11th and 20th of the month, your payment will be made on the third Wednesday of the month.
- If your birthday falls between the 21st and 31st of the month, your payment will be made on the fourth Wednesday of the month.
Make sure you check your bank account around the time of the payment to make sure you get your extra money.
What Does This Mean for Retirees?
Many retirees depend on their Social Security benefits as their main source of income. The COLA increase helps make sure that their purchasing power does not go down over time.
Giving someone an extra $4,873 a month could help them pay for things like food, medical bills, and other financial needs. Not every retiree will get the full amount, but even those who get a smaller increase will still benefit from this change.
This increase may help retirees feel safer and less stressed about their money during the holidays, even though their monthly payments will be higher.
The $4,873 check can give them extra money to spend on fun things with family and friends instead of worrying about how much things are going to cost.
How the Increase Will Affect Taxes
It is important to remember that, depending on your total income, your Social Security benefits might be taxed.
If you make more than a certain amount of money (including Social Security benefits and other income like pensions, wages, or withdrawals from retirement accounts), you may have to pay federal income taxes on some of your Social Security payments.
For people with higher incomes, the part of their Social Security income that is taxed could go up as their monthly benefit goes up because of the COLA increase.
To find out how this increase might affect your overall tax situation, it is a good idea to talk to a tax expert.
How Can Retirees Maximize Their Benefits?
The COLA increase helps right away, but retirees can also take steps to get the most out of their Social Security benefits over time. Here are some things to think about:
- Delay Social Security Claims: If possible, delaying your Social Security claim until age 70 can increase your monthly benefit. For each year you delay claiming past your full retirement age, your benefit amount increases by approximately 8%.
- Work Longer: If you’re still able to work and earn income, continuing to work for a few more years can boost your Social Security benefit, as your highest earning years are factored into the calculation of your monthly payment.
- Understand Tax Implications: Be mindful of how taxes might affect your Social Security benefits. Keeping your total income below certain thresholds could help reduce your taxable income.
Conclusion
Pensioners will get more money from Social Security this year, giving them something extra to look forward to over the holidays. As much as $4,873 a month is given to some lucky people, it is a welcome gift that can help with the rising costs of living.
The extra money in your monthly check will make a difference, whether you use it to pay bills, for medical costs, or just to treat yourself.
Make sure you check your bank account in December so you can enjoy the holidays with a little extra cash.
