After two years that saw Social Security cost-of-living adjustments (COLAs) soar to their highest level in four decades, beneficiaries will likely see a more modest increase in their monthly payments next year.
The inflation gauge used by the Social Security Administration (SSA) to set the annual COLA rose at a 2.6 percent annual rate for July and 3.4 percent for August — the first two of the three months the agency uses to determine the final figure, slated to be announced in October.
“The August uptick in inflation was a bit higher than previously anticipated, and September’s inflation numbers will likely come in at similar levels, pushing the COLA slightly north of 3 percent,” says Emerson Sprick, senior economic analyst at the Bipartisan Policy Center. A 3 percent adjustment would boost the average Social Security retirement benefit — $1,839 a month in July 2023 — by about $55 a month in 2024.
Other analysts, including Preston Caldwell, a senior U.S. economist at Morningstar; Alicia Munnell, director of the Center for Retirement Research at Boston College; and Richard Johnson, director of the Urban Institute’s Program on Retirement Policy, say they expect a 2024 COLA of around 3 percent.
That "might seem like a letdown" for Social Security recipients, Sprick says, "but it’s important to note that the COLA is calculated so that it exactly offsets the price increases consumers have faced, as measured by the Consumer Price Index, since the last COLA was determined."
“More broadly, a 3 percent COLA would be a great sign that inflation is getting under control, which is particularly important for those on fixed incomes,” he adds. “Having stable prices is highly preferable to having large COLAs."
All forms of benefits — retirement, disability, family and survivor — are affected by the COLA. The adjustment takes effect with December Social Security payments, which most beneficiaries will receive in January 2024.