Social Security's 2024 COLA: Smaller Increase
July 17, 2023: Social Security beneficiaries can expect a minor cost-of-living adjustment (COLA) in 2024 after receiving significant boosts in recent years. The COLA, which aims to protect against inflation, is estimated to be around 3% next year, down from a historic 8.7% increase in 2023.
In 2022, the U.S. faced intense inflation, causing the cost of essentials like gas, groceries, and utilities to skyrocket. Unfortunately, the 5.9% COLA applied to Social Security benefits last year failed to keep up with inflation, leading to a loss of buying power for recipients.
However, there was a much-needed turnaround in 2023 when Social Security benefits received the most significant increase over four decades, a substantial 8.7% COLA. This boost provided vital support to retirees, potentially helping them recoup their lost buying power from the previous year.
But every rise has its fall. After back-to-back large COLAs, experts predict that the 2024 increase will be significantly smaller. Projections indicate a 3% COLA for next year, which could still provide a modest benefit boost but won’t match the previous year’s record increase.
To calculate the COLA, the Social Security Administration looks at changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) during the third quarter (July through September). While the exact data for 2024 isn’t yet available, the CPI-W rose by just 2.3% in June 2023, indicating a potential lower COLA for the following year.
A 3% COLA in 2024 would mean an extra $55.12 per month in benefits for the average retired worker. Spouses, survivors, and disabled workers would also see increased monthly payments. While the smaller COLA might disappoint some, there is a silver lining. Due to the cooling inflation rate, Social Security benefits have regained some lost buying power, with benefits on track to recover the purchasing power lost in 2022.
Keep in mind that the estimate for the 2024 COLA could change as more data becomes available in the coming months. Social Security beneficiaries must also wait for the Medicare Part B premiums announcement, as any increase could impact their net benefits.
In summary, Social Security’s 2024 COLA might be smaller, but it offers hope for beneficiaries to recoup their lost buying power and maintain financial stability amidst changing economic conditions.