The declining US inflation rate is great news for consumers, but it may result in Social Security retirees receiving a much less cost-of-living adjustment (COLA) the next year—possibly 2% or less.
Based on the most recent inflation statistics, the Senior Citizens League, a nonpartisan seniors advocacy organization, supplied that estimate.
Check Your COLA
In October, the Social Security Administration calculates the COLA. The government based its computation on the difference between the third quarter and second quarter of the previous year’s Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) values. The COLA is zero if there is no change.
Social Security claimants can anticipate a significant rise in their monthly benefits for the upcoming fiscal year when the CPI-W increase is particularly high, as it was during the third quarter of 2022.
The 2023 COLA is 8.7%, which is the highest in more than 40 years due to the past year’s extremely high inflation rate.
The Senior Citizens League’s forecast for a significantly smaller COLA in fiscal 2024 is based on the declining 12-month average rate for the CPI-W.
The US Bureau of Labor Statistics released a report this week stating that the overall inflation rate increased by 6% for the calendar year ending in February 2023. Since the period ending in September 2021, that was the smallest 12-month gain.
For seniors, who have a lot of experience dealing with COLAs that don’t keep up with inflation, a minor change next year might be bad news. Not many seniors are sure that the record high 8.7% COLA this year will help combat the increasing prices of food and other goods.
See How Your Social Security Raise
The COLA for Social Security is the rise that the government typically gives to beneficiaries to reflect inflation or the rising cost of goods and services.
The word raise is enclosed in quotation marks to emphasize that this benefit increase is intended to keep pace with inflation rather than outperform it, as may occur with a more conventional rise from an employer.
Prior to 1975, Congress’s special sessions randomly assigned the COLA for Social Security. Luckily, the Consumer Price Index for Urban Wage Earners and Clerical Workers has provided the program with a more reliable inflationary tether since that time (CPI-W).
A long variety of subcategories and a few significant spending categories, each with a different percentage weighting, make up the CPI-W.
The CPI-W may be reduced to a single number thanks to these weightings, which makes it simple to compare it to the prior month or year to determine if there is inflation or deflation (dropping prices).
Even though the CPI-W is published monthly by the U.S. Bureau of Labor Statistics, Social Security’s COLA is solely based on data from the third quarter (July through September). The other months’ data can be used to spot pricing trends, but it has no bearing on the “increase” that Social Security’s more than 66 million recipients would get in 2024.
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