In October, the new Cost of Living Adjustment (COLA) score will be announced. COLA increases Social Security payments each year to ensure that beneficiaries are able to stay on top of rising prices for daily essentials and to stay ahead of inflation. While COLA has yet to be announced, experts estimate that some recipients of the Social Security Disability Insurance fund can expect to receive an increase of $50 per month.
Social Security benefits have been adjusted according to COLA since 1975
COLA is based off of the Consumer Price Index from the third quarter of the prior year to the corresponding quarter of the current year in which the COLA became effective. Prior to 1975, increases in benefits were set in place by legislation. After COLA is announced in October, increase in benefits are applied in December of the same year. The 2023/2024 year saw a COLA adjustment of 3.2%.
While COLA is a mandatory adjustment for Social Security benefits, many companies are starting to adjust their worker’s wages to account for inflation. This year, an estimated 50% of employers adjusted employees’ salaries by 3%, just shy of this year’s COLA 3.2% adjustment, or more. There is a growing push for all industry to link salary increases to COLA so as to prevent salaries and wages’ buying power being reduced.
Social Security Disability Insurance provides benefits to people with a disability which restricts their ability to work
SSDI provides both monthly monetary benefits as well as Medicare. To qualify for SSDI, you must have a disability or blindness and have a work history. You must have worked for at least five years in the last ten years before you became disabled if you are over 24. Your condition must limit your ability to earn over the substantial gainful activity income statistic (SGA). This year, SGA was set at $1,550 per month or $2,590 per month for blind individuals.
In October 2023, the average SSDI payment was $1,665.14 per month. For 2024, the maximum SSDI payment is set at $3,822 per month. The upcoming COLA statistic is estimated to be set at 2.5%. This means, for example, if you received $2,000 per month previously, you can expect your benefits to be increased to $2,050 per month. In 2022, the 2023 COLA statistic was announced to be a record 8.7%. Generally however, 2.5% is more consistent with previous increases.
COLA will effect all Social Security beneficiaries
COLA is not only limited to SSDI. All Social Security funds are adjusted according to COLA. Inflation spikes are currently easing, hence the more modest COLA adjustment for 2025. However, comparing COLA statistics prior to the COVID-19 pandemic in 2020, it is still somewhat higher than increases from the previous decade which averaged at 1.52%. This indicates that inflation is still rising and has not receded entirety to pre-pandemic rates.
However, SSDI recipients may not be able to experience the full impact of COLA adjustments. Medicare premium rates are also expected to increase. These are automatically deducted from some SSDI recipients accounts each month. For 2025, an estimated $10.30 increase per month for Medicare premium rates is expected. However, beneficiaries can still expect some type of increase to their current monthly payments.
Social Security is received by millions of Americans each year. It is a fundamental asset to retired and disabled individuals and their families. By the end of 2020, over 9 million Americans were receiving SSDI benefits. This number includes benefits paid to children and spouses of disabled individuals. About 72% of SSDI beneficiaries are between the ages of 50 and 66 meaning many of them may also receive retirement benefits.
SSDI significantly reduces financial stress for many individuals with disabilities. A 2021 study found the SSDI benefits reduce the risk of bankruptcy for beneficiaries by 20%.
