Rosalind Evans
Social Security recipients might brace themselves for a significantly more minor cost-of-living adjustment (COLA) in 2024 as the inflation rate slows.
The anticipated Social Security COLA could be around 3%, per a recent estimate by The Senior Citizens League, an impartial senior group. This estimate is based on June’s latest consumer price index data published.
The predicted rise surpasses the 2.7% increase that the group forecasted for 2024 just last month, thanks to adjustments in the average monthly inflation rate, stated Mary Johnson, a Social Security and Medicare policy analyst at The Senior Citizens League.
A new Social Security COLA forecast was released, predicting a 2.6% and 3.3% benefit increase in 2024.
If current inflation trends persist, the 3.3% rise could occur, says the public policy organization specializing in the federal budget and fiscal matters. Alternatively, a lower grade of 2.6% would happen if there’s no further inflation for the remainder of the year, as per the forecast.
However, the projected increases for next year would still fall behind the 8.7% rise that beneficiaries experienced in 2023, the most significant increase in forty years. In 2022, a record increase of 5.9% was noted.
Starting from January, Social Security benefits have increased by over $140 per month on average, according to the Social Security Administration’s estimates. This increase affected around 70 million recipients of Social Security and Supplemental Security Income (SSI).
The cost-of-living adjustment intends to ensure that benefits stay in line with inflation.
The highest ever COLA – 14.3% – was implemented in 1981. In contrast, in 2010, 2011, and 2016, recipients witnessed no increases in benefits.
There are three more months of data before the official COLA is announced. However, this estimate is still tentative and could change before the Social Security Administration discloses the COLA for 2024 in October.
“It’s not unusual for the average monthly rate to fluctuate,” Johnson commented. “This fluctuation results in changes to the COLA estimate every month.”
As of June, the consumer price index increased by 3% compared to the previous year, as per the data released on Wednesday.
The Social Security Administration uses a subset of this index – the consumer price index for urban wage earners and clerical workers (CPI-W) – to determine the annual COLA.
The COLA is calculated based on the percentage change in the CPI-W from the preceding year’s third quarter to the current year’s third quarter. If there’s no increase, there’s no COLA.
Johnson added that the chance that next year’s COLA could be zero seems improbable.
The significant 8.7% cost-of-living adjustment in 2023 has surpassed the year-over-year increases in the CPI-W each month since its implementation in January. The latest data from June shows a 2.3% rise in the CPI-W over the last 12 months.
Contrarily, the 5.9% increase in benefits in 2022 was mostly lagging behind inflation.
“There has indeed been some catching up that has occurred,” said Johnson about this year’s benefit increase.
However, retirees and other beneficiaries may find that the cost-of-living adjustment doesn’t exactly align with the personal cost increases they are witnessing.
“It’s an infrequent occasion for it to align perfectly,” stated Johnson.
Around 53% of beneficiaries have reported that their actual expenses have increased more than the monetary amount of their cost-of-living adjustments, based on the research conducted by The Senior Citizens League.
The discrepancies between COLA and personal expense increases highlight the ongoing challenges Social Security beneficiaries face in maintaining their living standards amid shifting economic landscapes. As inflation trends continue to influence future COLAs, beneficiaries and policy analysts will keenly see how these adjustments impact their real-world purchasing power. These developments are a stark reminder of the importance of comprehensively addressing the inflationary pressures affecting the most vulnerable segments of our society.
