Social Security recipients will get a 3.2 percent increase in their monthly payments next year, the Social Security Administration (SSA) announced Oct. 12.
The 2024 cost-of-living adjustment (COLA) marks a big drop from this year’s increase of 8.7 percent, reflecting a considerable cooldown of inflation over the past 12 months.
Starting in January, the average monthly Social Security retirement benefit will rise by $59, from approximately $1,848 to $1,907, according to the SSA. The average disability benefit will increase from $1,489 to $1,537.
“Retirees can rest a little easier at night knowing they will soon receive an increase in their Social Security checks to help them keep up with rising prices,” AARP Chief Executive Officer Jo Ann Jenkins said in a statement following the announcement. “We know older Americans are still feeling the sting when they buy groceries and gas, making every dollar important.”
The COLA will be applied to veterans’ benefits and retirement pay as well as Social Security payments.
Consumer prices drive COLA
The SSA bases the COLA on changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the third quarter from one year to the next. The CPI-W is a subset of the main consumer price index, which provides the headline number in reporting on inflation.
The 2024 adjustment represents the difference between the average CPI-W index for July, August and September of 2022 and the average for those months in 2023. Shortly before the COLA reveal, the U.S. Bureau of Labor Statistics announced that the CPI-W rose at a 3.6 percent rate in September, following increases of 2.6 percent and 3.4 percent in July and August, respectively.
Social Security benefits have been annually adjusted for inflation since 1975. The previous two COLAs — 5.9 percent in 2022 and 8.7 percent in 2023 — were the largest since the early 1980s and increased the average monthly retirement benefit by $92 and $146, respectively, in those years.
Inflation, Medicare impact
While sharply lower than in the last two years, the 2024 adjustment could still buttress retirees’ buying power if inflation rises at a slower clip than the COLA. The Federal Reserve’s Survey of Professional Forecasters projects that the main Consumer Price Index will decline gradually from the current 3.6 percent to 2.7 percent by mid-2024.