How much of an increase Social Security recipients will receive in 2024 won’t be known for several more months. Yet it’s not too early to begin planning.
The Senior Citizens League has carried out just that. In a statement last week, the nonpartisan group that fights for seniors predicted that the Social Security cost-of-living adjustment (COLA) for the following year maybe 2.7%. Here’s why that proportion might be excessive.
Anticipating the 2024 Social Security COLA
According to the Senior Citizens League, inflation is at its lowest level since March 2021. On the most recent consumer price information, this discovery was made.
Using the Consumer Price Index for Urban Wage Earners and Clerical Workers, Social Security COLAs are determined (CPI-W). The CPI-W increased by 3.6% year over year in May.
Why didn’t the Senior Citizens League base their estimate on this 3.6% figure? The group stated that the rate of inflation is still declining.
Evidently, the Federal Reserve concurs. The previous interest-rate hikes presumably still haven’t fully made their way through the economy, meaning that inflation could continue to decrease.
The Fed noted at its most recent meeting that there are “lags with which monetary policy influences economic activity and inflation.”
The Senior Citizens League did not provide any information on how exactly it calculated its COLA prediction for 2024. Yet, based on the present pattern, it appears that the group tried to predict how inflation may decrease over the coming few months.
In comparison to the 8.7% COLA that retirees received this year, a 2.7% adjustment would be significantly less. That estimate, though, might still be excessive.
The Social Security Administration (SSA) does not calculate the COLA using a single month. The agency instead contrasts the average CPI-W for the third quarter with the average for the same time last year.
Read more: Struggling to Keep Up: The Decline of an ‘Average’ American Income
Potential Factors and Considerations
For the time being, let’s suppose that inflation will mostly stay the same from its May level through the conclusion of the third quarter of 2023. The COLA for the following year would be close to 2.2% if that were to occur.
What if the Fed’s rate increases actually take effect and inflation significantly decreases over the upcoming months? This fictitious scenario suggests that the COLA for 2024 may be even lower than 2.2%.
It is very likely that Social Security benefit increases will be less than what the Senior Citizens League anticipates. There is an argument to be made for raising it.
The organization’s continuous poll revealed that seniors haven’t yet noticed much of a decrease in their home expenses. The fastest-growing cost, according to 62% of the respondents, was food.
The CPI-significant W’s flaw is that it does not accurately reflect the costs of senior citizens.
The Consumer Price Index for the Elderly (CPI-E) has been proposed as an alternative measure that would alleviate some of the problems with the CPI-W. However, no efforts have been made thus far to include it in the COLA calculation formula.
Every gain is preferable to none. Therefore, retirees should prepare themselves for a poor boost in Social Security benefits the next year.
Read more: Tax Crimes and Gun Charge: Hunter Biden Guilty Plea and Legal Agreement Revealed
