The Social Security Administration indicates that, on average, beneficiaries will see an increase of more than $50 per month starting in January. The increase could be a welcome boost for those on a fixed income, though it is a smaller adjustment than last year’s raise of 8.7%.
U.S. News & World Report’s recent article, “What Will the Social Security COLA Raise Be for 2024?” says every October, the Social Security Administration determines the cost-of-living adjustment, or COLA, for the following year. This rate is applied to the checks distributed to beneficiaries every month. The COLA is set after a review of inflation data, and the rate accounts for current and upcoming trends.
There’s a method that is used to establish the COLA every year. The Social Security Administration reviews the percentage changes in the consumer price index during the third quarter from one year to the next. This information is applied to the calculations for the upcoming COLA.
According to the U.S. Bureau of Labor Statistics, the consumer price index for September 2023 came in at 0.4%. The rate indicates that prices increased by 0.4% from July 2023 to August 2023. Items increased by an average of 3.7% during the previous 12 months. Overall inflation in 2023 has been lower than in 2022, which saw 40-year highs such as 9.1% in June of that year.
Also, the CPI for August 2023 was 0.6%, so prices increased by 0.6% from June 2023 to July 2023. Overall, the cost of goods rose by 3.7% during the previous 12 months. In July 2023, the consumer price index was just 0.2%, indicating a 0.2% increase from May 2023 to June 2023. The overall prices went up by 3.2% during the prior 12 months.
The low rates are indicators that living expenses for Americans, on average, have not climbed steeply during the last months. “Ultimately, the Social Security Administration determines its cost-of-living adjustment based on its expectations for the inflation rate in the next year,” says Krieg Tidemann, assistant professor of economics at Niagara University. The announcement of 3.2% coincides closely with what some experts predicted. The Senior Citizens League, for instance, had estimated the COLA could be 3% for 2024.
In 2023, the COLA was 8.7%, the largest increase since 1981. This followed a 5.9% increase, the highest in four decades when it was issued. A paycheck of $1,000 in 2021 would have increased by $59 in 2022 to $1,059. Following the COLA of 2023, the amount would have gone up by an estimated $92 to be $1,151. An additional 3.2% bump will increase $37 on the 2023 payout, making a benefit amount of $1,188 in 2024.
As a result, some may see the lower rate of 3.2% as less of an increase. COLA was so high in 2022 and 2023 because inflation was so high in 2021 and 2022. It may signify continued cooling inflation and rates that might coincide with historical averages during the previous decades.
Reference: U.S. News & World Report (Oct. 13, 2023) “What Will the Social Security COLA Raise Be for 2024?”