With one month of consumer price data left to go before a final determination, it appears there will be a Social Security cost-of-living adjustment (COLA) for 2024, but it won’t be nearly as high as the massive, inflation-fueled adjustment in 2023.
According to just-released estimates by The Senior Citizens League (TSCL), the Social Security COLA for 2024 will likely be 3.2%, based on a jump in consumer price data through August. A COLA of 3.2% would raise an average monthly retiree benefit of $1,790 by $57.30, the organization notes.
While a 3.2% COLA is significantly lower than the 8.7% received in 2023—the highest COLA in more than four decades—it’s still higher than the average over the past 20 years, which was 2.6%. Last month, TSCL predicted that Social Security recipients may get a 3% COLA in 2024.
COLA Estimates and CPI Data
TSCL’s estimates are based on monthly data released by the Bureau of Labor Statistics (BLS). The August data, released Sept. 13, shows that the Consumer Price Index for All Urban Consumers (CPI-U) rose 0.6% on a seasonally adjusted basis, after increasing 0.2% in July.
Over the last 12 months, the all-items index increased 3.7% before seasonal adjustment. The index for gasoline was the largest contributor to the monthly all-items increase, accounting for over half of the increase. Also contributing to the August monthly increase was continued advancement in the shelter index (e.g., rent, housing, lodging, etc.), which rose for the 40th consecutive month, the BLS notes.
The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W)—which is used to determine the Social Security COLA—increased 3.4% over the last 12 months. For the month, the index increased 0.6% prior to seasonal adjustment.
By law, the annual inflation adjustment is based on the average inflation during July, August, and September, as measured by the CPI-W. Inflation for these three months is added together and averaged, then compared with the third-quarter average from one year ago. The percentage difference between the two is the amount of the COLA, which would be payable for the check received in January 2024.
As it does each year, the Social Security Administration is expected to announce the COLA for 2024 in mid-October—providing an early precursor of what can be expected for COLAs on retirement plan contribution and benefit limits.
Meanwhile, TSCL further notes that older households report very modest spending despite the record COLA in 2023. “In 2023, retirees received the highest COLA in 40 years—but nobody is getting rich,” notes Mary Johnson, Social Security and Medicare policy analyst at TSCL. “The reality is that the dollar amount of the COLA increase received is meager at best, with the average monthly retiree benefit only $1,790 in 2023.”
According to TSCL’s latest retirement survey, 45% of those participating report spending less than $2,000 on monthly expenses in 2023, as detailed in the table below.
| How Much Do Retirees Spend Per Month In 2023? | |
|---|---|
| Less than $1,000 | 8% |
| $1,001 - $1,999 | 37% |
| $2,000 - $3,999 | 37% |
| $4,000 - $5,999 | 11% |
| More than $5,999 | 4% |
| Uncertain | 3% |
Source: TSCL Retirement Survey, Sept. 7, 2023, 2,258 responses.
According to an Actuarial Note from the Social Security Office of Chief Actuary, Social Security benefits are modest, replacing roughly a third of a middle earner’s average wages. Making matters worse, TSCL notes, is that most older adults claim Social Security benefits before reaching full retirement age and receive permanently reduced benefits, as shown in this table.
| Most Retirees Are Getting Reduced Social Security Benefits | |
|---|---|
| Age at Retirement and Effect on Benefits | Percent Claiming |
| Claimed when younger than full retirement age and benefits were permanently reduced. | 59% |
| Claimed at full retirement age and receiving the full unreduced amount. | 19% |
| Claimed when older than full retirement age and receiving a higher benefit due to the 8% per year delayed retirement credit up to age 70. | 7% |
| Uncertain which statement applies. | 11% |
| Not applicable. Haven’t started benefits yet. | 4% |
Source: TSCL Retirement Survey, Sept. 7, 2023, 2,259 responses.
“The bottom line for retirees won’t be known until Medicare premiums are announced, which is typically in November,” Johnson further notes, explaining that the SSA automatically deducts Medicare Part B premiums from Social Security benefits before the benefits are received.
In its annual report released in March, the Medicare Trustees forecast monthly Part B premiums to increase from $164.90 in 2023 to $174.80 in 2024. But that estimate doesn’t include any significant new costs that may arise after the estimate is released, such as, for example, the significant costs for a new drug to treat Alzheimer’s disease, expected to cost $26,000 per year without insurance. Altogether, most beneficiaries may see their Part B premium rise by almost $15 per month from 2023, TSCL notes.
