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Retirement Planning > Social Security

Social Security COLA Estimated at 3.1% for 2024

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What You Need to Know

  • The estimate reflects a 4.9% rise in prices in April from a year ago, according to The Senior Citizens League.
  • Social Security benefits have lost 36% of their purchasing power since 2000, according to the advocacy group.
  • The actual 2024 COLA will be based on third-quarter inflation data and will be announced in October.

The consumer price index data for April, released Wednesday, shows that prices have risen by 4.9% over the past 12 months while increasing 0.4% in April. This is up from 0.1% the previous month, showing a slight acceleration in inflation.

Based on this data, the Senior Citizens League estimates the Social Security cost-of-living adjustment, or COLA, for 2024 will be 3.1%. This is far below the near-record 8.7% COLA for 2023.

Mary Johnson, the league’s Social Security and Medicare policy analyst, bases monthly COLA estimates on changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers, known as the CPI-W. In March, the league offered an early estimate suggesting the 2024 COLA will likely fall below 3%, with a real chance of a retirees seeing a 0% COLA should inflation cool more quickly than expected this year amid a possible recession.

The Social Security Administration uses average inflation in the third quarter, based on the CPI-W, to calculate the benefit adjustment for the following year. This actual COLA for 2024, as such, won’t be known until October.

The Latest Inflation Data

During April, the biggest price increases were in seen in the shelter, used cars/trucks and gasoline categories. The increase in the gasoline index more than offset declines in other energy component indexes, and the energy index rose 0.6% in April.

The food index was unchanged in April, as it was in March. The index for food at home fell 0.2% over the month, while the index for food away from home rose 0.4%.

The index less food and energy rose 0.4% in April, the same as it did in March. For the past 12 months, the items less food and energy index rose 5.5%.

Effects on Retirees

In conjunction with its first formal 2024 COLA projection, the Senior Citizens League has published new research on the buying power of Social Security benefits.

As the research emphasizes, a lower inflation rate does not mean that prices have come down, and retired Americans continue to struggle with higher prices. The new study shows that Social Security benefits have lost some 36% of their buying power to inflation since 2000.

Expressed in dollar terms, these retirees would need an extra $516.70 per month (or $6,200 per year in 2023) to maintain the same level of buying power they enjoyed in 2000. According to Johnson, the study confirms that the prices older consumers are paying are fortunately not growing as fast as a year ago, but many prices on key items remain stubbornly high.

Johnson warns that the buying power of Social Security benefits can erode rapidly when the annual cost-of-living adjustment fails to keep pace with rising costs. In some years, however, buying power can actually improve modestly when inflation moderates.

“One year ago, the prior version of the study found that Social Security benefits had lost 40% of buying power since 2000,” Johnson points out. “That was the deepest loss in buying power since the start of this study in 2010.”

This year the study update shows that the loss of buying power slightly improved — by four percentage points — to 36%. However, as Johnson points out, this is still one of the deepest losses recorded by the league, exceeded only by the loss experienced in 2022 due to that year’s rampant inflation.

COLA and Inflation History

According to the league’s analysis, between January 2000 and February 2023, Social Security COLAs increased benefits by 78%, averaging 3.4% annually.

The cost of goods and services purchased by typical retirees rose by 141.4% during that same period, averaging about 6.2% annually. In other words, for every $100 a retired household spent on groceries in 2000, that household can only buy about $64 worth today.

(Image: David Palmer/ALM)


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