Social Security will get an above-average COLA next year, experts predict

A leading advocacy group for retirees is predicting an above-average boost to Social Security next year — but it still may not be enough to keep up with inflation.

The cost-of-living adjustment (COLA) for the program in 2024 will likely be 3.2%, according to The Senior Citizens League, a nonprofit seniors group in Alexandria, Virginia. That’s more than the average COLA of the past 20 years, which has been 2.6%. 

But with prices rising at 3.7% year-on-year, according to the U.S. Bureau of Labor Statistics, some experts say seniors have little to celebrate.

“They’re not going to sneeze at it,” said Mary Johnson, a Social Security policy analyst at The Senior Citizens League. “This is a higher than average COLA, and they’re going to be internally breathing a sigh of relief. But they’re still going to be disappointed that … the actual amount of their increase is not going to be enough to maybe even pay the oil bill.”

The Social Security Administration will announce the official 2024 COLA in mid-October. Since 1975, the New Deal-era program has been adjusting benefits to keep pace with inflation — or attempting to do so — every year.

In 2023, the COLA was unusually high: 8.7%, the largest adjustment since 1981. And yet as prices continued to rise — and remained elevated from the previous, higher inflation of 2022 — many retirees still found themselves falling behind.

“From what we are hearing from people … the dollar amount of their increases really doesn’t go that far,” Johnson said. “Things like rent, housing, medical costs, repairs — all of these have remained higher than they were a year ago.”

In addition to that lingering elevation, the past two months have seen inflation tick back up after a year of decline. The Consumer Price Index increased year-on-year by 3.7% in August, up from 3.2% in July and 3% in June.

And in terms of the individual expenses seniors have to budget for, the numbers are often higher. Food prices, for example, rose by 4.3% in August, housing costs rose by 7.3% and medical care commodities rose by 4.5%.

Read more: Smaller Social Security COLA to tighten vise on retiree budgets

Against all these costs, Social Security offers an important lifeline. This year, 49.4 million retired workers rely on the program, receiving a total of $90.8 billion in benefits, according to the Social Security Administration.

And unlike other sources of income — such as retirement plans or annuities — Social Security is automatically adjusted, however imperfectly, for inflation. Many financial advisors see that as a significant advantage.

“The 3.2% COLA doesn’t seem all that impressive on a year to year basis, but it is incredibly valuable,” said Eric Amzalag, owner of Peak Financial Planning in Woodland Hills, California. “Household portfolio income is never guaranteed to be inflation-protected, because individuals are not in control of markets. Some years the market’s up, some years the market’s down.”

Even wealth managers with more affluent clients say Social Security is an important piece of the retirement puzzle — not because it provides substantial income by itself, but because it protects other funds from being disbursed too soon.

“Social Security becomes a vital source of reliable, consistent and inflation-adjusted income that my clients use to reduce the withdrawal demand on their savings,” said Erik Nero, founder of First Step Wealth Planning in Saratoga Springs, New York. “Clients aren’t going to book a vacation with the increase on their Social Security benefits, but the increase will help offset the rise in energy prices in their budget.”

What impact would a 3.2% COLA have? The Senior Citizens League calculates that the average benefit for a retiree is $1,790, so the new adjustment would add another $57.30 to each monthly check.

Whether that’s a lot or a little depends on one’s budget. In 2023, according to the league’s research, 37% of retirees spent between $1,000 and $2,000 per month, and 8% spent even less than that. For those seniors, an additional $57 could be significant.

Read more: Retirees say Social Security COLA is no match for inflation

However, another social program may eat into that cash before seniors can spend it. For those already collecting Social Security, Medicare Part B premiums are automatically deducted from their benefits. The dollar amount of those premiums for 2024 has not been announced yet, but Medicare’s Board of Trustees has predicted that they’ll increase next year from $164.90 to $174.80.

“Usually that deduction alone can consume most or all the cost-of-living adjustment,” Johnson said.

The upshot of all this is that the COLA is an important feature of Social Security benefits — especially in times of high inflation — but it does little to address the fact that those benefits are so limited to begin with.

“Social Security is one of the only forms of retirement income we have that’s adjusted for inflation,” Johnson said. “But it’s not fail-safe, and people are still falling behind.”


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