This year, 66 million Social Security recipients received their largest cost-of-living adjustment since 1981, 8.7%, to combat 40 years of inflation.
According to the Senior Citizens League, an advocacy group for older Americans that closely monitors Social Security, next year’s adjustment in benefits is anticipated to be significantly smaller.
Social Security COLA Will Be The Lowest In Three Years
Based on current inflation patterns, retirees and other recipients may receive a cost-of-living adjustment (COLA) of only 3.1%. This would make the COLA for 2024 the least substantial in the past three years, following an increase of 8.7% this year and 5.9% in 2022.
Although inflation has been declining, it remains higher than 3.1%, as evidenced by a 4.9% rise in consumer prices on an annual basis in April.
The estimate of 3.1% is based on the average rate of inflation over a 12-month period, as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which is the index used by the Social Security Administration to annually adjust benefits.
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Inflation Rate Decline Raises Concerns for Seniors’ COLA
However, this index has faced criticism for not accurately reflecting the spending habits of seniors, as older Americans typically allocate a larger portion of their income towards healthcare expenses compared to younger workers.
Mary Johnson, the Social Security and Medicare policy analyst at the Senior Citizens League, pointed out this discrepancy.
Johnson highlighted that the inflation rate has been declining since last June when price increases reached a 40-year high of 9.1%. She expressed concern that a 3.1% COLA next year may negatively impact many seniors, particularly because surveys conducted by the league have indicated that over half of older Americans felt that this year’s significant COLA did not adequately cover their rising costs.
In fact, about 53% of respondents reported that their household expenses in 2022 increased by more than 8.7%.
It is worth noting that the Social Security Administration will not announce its adjustment for 2024 until October, providing several months for potential changes.
The agency calculates the COLA based on the percentage increase in the CPI-W during the third quarter compared to the previous year.
If there is no increase between these figures, no COLA adjustment will be made, as specified by the agency.
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