Relatively high inflation in the past year has been somewhat kind to those depending on Social Security cost-of-living adjustments (COLAs).
While Social Security inflation adjustments don’t cover every increased living expense, it’s a modest buffer. But with the cost of living abating, the COLA will follow.
According to a recent Senior Citizen’s League (TSCL) study, the COLA for 2024 is likely to be around 3%. Of course, this estimate could change based on upcoming inflation trends, but the COLA always looks backward at past trends.
It’s also important to keep an eye on Medicare Part B premiums, which are tied to Social Security payments. They could rise — or fall — based on inflation trends.
“A COLA of 3% would raise an average monthly benefit of $1,787.00 by a little more than $53.60,” the TSCL estimates for next year. “But Social Security recipients won’t learn the bottom line until the Medicare Part B premiums are announced. Part B premiums are automatically deducted from most beneficiaries’ Social Security benefit. In many years, the Part B premium increase can take most, or even all, the COLA leaving little else to cover other rising prices.”
The final word on the 2024 COLA has yet to be written, though. At this writing, there are still three more months of data before the 2024 COLA is announced in October; this estimate could change.
The Social Security Administration will then do some math as the year winds down. The COLA is calculated “based on inflation in the third quarter — July, August, and September — as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).”
Inflation for those 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. The 2023 COLA computation can be found on the Social Security website.
Unless there’s another shock to the U.S. economy that would drive inflation north, don’t expect past COLAs to prevail. You probably won’t see an 8.7% COLA that was posted in late 2022.
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