The Senior Citizens League estimates a 3% cost of living adjustment (COLA) for Social Security beneficiaries in 2024.
New consumer price index data for June, released on Wednesday, supports this estimate. The rate of inflation’s continued fall contributes to the projected lower adjustment.
Social Security beneficiaries may anticipate a much lower cost-of-living adjustment for 2024. A nonpartisan senior group, The Senior Citizens League, provides the latest estimate for the Social Security Cost of Living Adjustment.
Mary Johnson, a Social Security and Medicare policy analyst at The Senior Citizens League, highlights that the estimate has increased. Compared to the group’s projection last month, the estimate for the 2024 increase is higher. This upward revision is attributed to changes in the average monthly inflation rate.
On Wednesday, the Committee for a Responsible Federal Budget released its Social Security cost of living adjustment estimate. According to the estimate, a projected benefit increase in 2024 ranges from 2.6% to 3.3%. A higher increase of 3.3% would occur if recent inflation trends persist.
Conversely, the lower increase of 2.6% would happen if there was no net inflation for the rest of the year. Notably, these projected increases for next year fall short of the 8.7% boost witnessed in 2023.
In 2022, beneficiaries experienced a record increase of 5.9%. The Committee’s focus revolves around the federal budget and fiscal issues related to public policy.
Estimates provided by the Social Security Administration indicate that, on average, Social Security benefits increased by over $140 per month. This increase positively impacted around 70 million Social Security and SSI beneficiaries.
The cost-of-living adjustment aims to ensure benefits keep pace with inflation. The largest cost of living adjustment on record, a 14.3% increase, was implemented in 1981.
In certain years (2010, 2011, and 2016), beneficiaries received no benefit increases. The Social Security Administration provides these estimates to track benefit adjustments.
The increase in benefits aims to maintain the purchasing power of Social Security recipients.
The official Cost Of Living Adjustment will be announced in October
The estimate for the Social Security cost of living adjustment in 2024 is preliminary and subject to change. The Social Security Administration will announce the final COLA in October. Mary Johnson explains that the average monthly rate, which determines the estimate, can fluctuate.
Since January, the 8.7% COLA has consistently surpassed the monthly year-over-year increases of the CPI-W. Recent data for June indicates a 2.3% CPI-W increase over the past 12 months.
However, the 5.9% benefit boost in 2022 generally fell behind inflation. Nonetheless, Mary Johnson highlights that this year’s increase makes up for previous shortfalls. Nevertheless, the cost-of-living adjustment may not align precisely with individuals’ personal cost increases.
The estimate for the COLA fluctuates based on monthly variations in the average monthly rate. Notably, the consumer price index rose by 3% compared to last year’s June, as reported on Wednesday.
Despite occasional exceptions, Johnson asserts that closely matching the COLA with personal costs is rare. Research conducted by The Senior Citizens League reveals that 53% of beneficiaries experience higher costs than the adjustment.
Consequently, retirees and beneficiaries may observe divergences between their own expenses and the COLA amount.
Spending Patterns and Impact
The 8.7% COLA in 2023 led to an average increase of $140 per month for Social Security beneficiaries. Research by the Bank of America Institute reveals higher spending growth among older generations.
Individuals born in 1964 or earlier experienced household spending growth between 4% and 6% year over year. In contrast, the overall spending growth for all age groups was 2%.
Bank of America Institute also relies on proprietary data to analyze consumer trends. Notably, Bank of America serves around 67 million clients, which accounts for approximately 1 in every 2 households.
Although older generations displayed similar spending patterns to other age groups throughout most of 2022, spending growth among older generations surpassed the average rate since late November.
The 8.7% increase in benefits aimed to bridge the gap, yet the CPI-W and personal cost experiences may vary for Social Security recipients.