May 18, 2024

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The Social Security cost-of-living adjustment is estimated to be 2.7% in 2024

The Social Security cost-of-living adjustment is estimated to be 2.7% in 2024
  • New government data for May shows that inflation is cooling.
  • For Social Security beneficiaries, this could be bittersweet news, because even though some rates may come down, next year’s cost-of-living adjustment could be lower.

Djorje Krstic | iStock | Getty Images

New government data shows that the annual rate of inflation fell to its lowest level in nearly two years as of May.

But this could be bittersweet news for Social Security beneficiaries, as they could get a much lower cost-of-living adjustment in 2024 than they did this year.

The Social Security COLA could reach 2.7% in 2024 based on the latest Consumer Price Index data, according to the Senior Citizens Association, a large, nonpartisan group.

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That would be well below the record 8.7% COLA Social Security beneficiaries hit this year, the highest increase in four decades due to record high inflation.

The US Labor Department said on Tuesday that its consumer price index rose 4% year-over-year as of May, and 0.1% for the month.

The subset of the indicator used to determine next year’s cost-of-living adjustment, the Consumer Price Index for urban wage earners and clerical workers, or CPI-W, rose 3.6% year-over-year — the lowest level since March 2021. The Senior Citizens Association noted.

The latest 2024 COLA estimate is certainly subject to change, and it could also point to a smaller benefit increase for next year as inflation continues to fall, noted Marie Johnson, Social Security and Medicare policy analyst at the Senior Citizens League.

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The Social Security Administration calculates the annual COLA by determining the percentage change in the CPI-W from the third quarter of the previous year to the third quarter of the current year. If there is no excess, there is no COLA.

Over the past 10 years, the average Social Security COLA has been 2.6%, according to Johnson.

Although inflation has fallen, prices remain high although the rate of price increases has slowed, Johnson said.

She noted that some categories, such as insurance and Medicare costs, rarely go down.

“The fact that we even expect there will be COLA at all means that prices are higher than they were a year ago,” Johnson said.

“That part of it continues to be a major problem for retirees and disabled recipients of Social Security who live on a fixed income,” she said.

The fact that we’re even forecasting COLA at all means prices are higher than they were a year ago.

Mary Johnson

Social Security and Medicare policy analyst at the Senior Citizens Association

It was expected to give a standardized growth rate (COLA) of 8.7% for 2023 to recipients Over $140 per month Starting in January, according to Social Security Administration.

Richard Fiesta, executive director of the Alliance for Retired Americans, said this year’s benefit increase had a “mitigating effect” for retirees.

He said new caps of $35 per month on insulin for Medicare beneficiaries starting in January, which went into effect under the Inflation Reduction Act, have also helped.

“We are definitely seeing from our members that this has an immediate and positive impact on their pocket,” Fiesta said.

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In the long term, the Association of Seniors and the Alliance of Retired Americans, as well as other groups, hope that the annual COLA measure will be changed to the Consumer Price Index for Seniors, or CPI-E.

Fiesta said the measure would more accurately reflect the categories retirees spend their money on, such as health care, food and fuel.

Proposals for democratic reform of Social Security included this change. However, not all experts are convinced that CPI-E would be a better measure of COLA.