Social Security COLA Estimates 3% for 2024, beneficiaries may see a lower cost of living adjustment as inflation cools
The latest inflation figures are out for June. What is the impact on the 2024 COLA for seniors?
The falling U.S. inflation rate is good news for American consumers, but it could lead to a much smaller cost-of-living adjustment (COLA) for Social Security beneficiaries next year — possibly as low as 3% or less.
The Senior Citizens League estimates the Social Security cost-of-living adjustment, or COLA, for 2024 will be 3%, based on the latest consumer price index data, released Wednesday, July 12th. The Bureau of Labor Statistics data shows that the Consumer Price Index (CPI) came in at 3% for the 12 months ending in June; this was the smallest 12-month increase since the period ending in March 2021. The CPI rose 0.2% in June on a seasonally adjusted basis, after increasing 0.1% in May.
Forbes reported that Inflation fell to its lowest level in more than two years as tightening from the Federal Reserve continues to bear fruit: the Labor Department’s consumer price index was 3% higher last month than it was the year prior, a massive decline from last June’s 9.1%. But some data indicates inflation is persistent and above the Fed’s 2% target.
CNBC reported that the Social Security COLA may end up being 3% for 2024, according to a new estimate from The Senior Citizens League, a nonpartisan senior group, based on new consumer price index data for June released on Wednesday.
Note: the actual 2024 COLA will be based on third-quarter inflation data and will be announced in October, but the estimates typically are a precursor of what can be expected for retirement plan contribution and benefit limits. This site Fed Smith has a very detailed article on this subject.
Key Takeaways
- Social Security beneficiaries have seen record-high cost-of-living adjustments in recent years due to high inflation.
- This time last year, estimates showed that the 2023 cost-of-living-adjustment (COLA) for Social Security could exceed 10%
- But after more than a year’s worth of interest rate increases and cooling inflation, the 2024 estimates have been cut dramatically compared to last year.
- This recent estimate reflects a 0.2% rise in prices in June and a 3% increase over the prior 12 months, according to The Senior Citizens League.
June 2023 Data Boosts COLA Projection
An article in Think Advisor reported that the index for shelter was the largest contributor to the slight monthly uptick in prices, accounting for over 70% of the increase, with the index for motor vehicle insurance also contributing.
The food index increased 0.1% in June after increasing 0.2% the previous month. The index for food at home was unchanged over the month, while the index for food away from home rose more significantly, at 0.4%, during June.
The energy index rose 0.6% in June as the major energy component indexes were mixed.
The Committee for a Responsible Federal Budget issued its own Social Security COLA estimate on Wednesday that anticipates a benefit increase for 2024 in the range of 2.6% to 3.3%.
The 3.3% increase would happen if recent inflation trends continue, according to the public policy organization focused on federal budget and fiscal issues. A lower 2.6% rise would happen if there is no net inflation for the rest of the year, according to the forecast.
The projected increases to benefits for next year would fall short of the 8.7% rise beneficiaries saw in 2023 — the highest boost in four decades. In 2022, beneficiaries saw a 5.9% increase, which was also a record increase at the time.
Social Security benefits rose by more than $140 per month on average starting in January, according to estimates from the Social Security Administration. The increase applied to about 70 million Social Security and Supplemental Security Income, or SSI, beneficiaries.
Conclusion
According to Yahoo News, A small adjustment next year could prove to be bad news for seniors, who have plenty of experience dealing with COLAs that don’t keep up with inflation. Even with this year’s historically high 8.7% COLA, not all seniors are convinced it is effective at battling high prices for food and other items. According to an ongoing survey conducted by The Senior Citizens League, older consumers are reporting little improvement in their household buying power, even with the recent sizable COLAs and a slight moderation in inflation.
