The annual Social Security cost-of-living increase (COLA) is expected to be around 3% in 2024. For seniors who are struggling with inflation, the increase might not offer any real relief.
Despite 2023’s COLA increase of 8.7% — the largest adjustment to the benefit in four decades — 79% of retirees told The Senior Citizens League (TSCL) that, as of July, their budgets were still significantly impacted by inflation. While the projected increase could potentially help this group deal with high food and gas costs, it falls short of the 3.2% year-over-year increase in prices, as reported in the Bureau of Labor Statistics’ latest consumer price index (CPI) report, released earlier this month.
Here's what that will mean for the nearly 67 million Americans who now receive a monthly benefit from Social Security.
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What is COLA?
Every year the Social Security Administration (SSA) makes a cost-of-living adjustment to the Social Security benefit. The adjustment is tied to inflation, specifically to the average inflation rates during the third quarter (July, August and September) of the current year, as compared to the prior year.
While the COLA adjustment can help Social Security recipients manage annual increases in living expenses, it's not guaranteed to outpace or even keep up with inflation. In 2018, the increase amounted to 2.8%, but that dropped down to 1.6% and 1.3% for 2019 and 2020. Record-breaking inflation drove the COLA up to 5.9% in 2021 and 8.7% in 2022. But with inflation receding (albeit slowly) analysts expect the adjustment to drop back closer to 2018's rate.
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How will the Social Security adjustment impact you?
Analysts project a 3% COLA increase for next year, but the Social Security Administration won't announce the official figure until October. For recipients, the adjustment will be reflected in the January 2024 benefit.
If there is indeed a 3% increase, TSCL says it will add just over $53 a month (or $644 a year) to the average benefit, which is currently $1,789 a month. By comparison, the 2022 adjustment of 8.7% added $147 a month.