Social Security COLA increase for 2024 could be higher than expected

Payments to Social Security recipients may increase a bit more than expected in 2024, but an advocacy group says they’ll still fall short of what retirees need.

The Senior Citizens League said Wednesday that the Social Security cost of living adjustment, or COLA, will likely be 3.2% for 2024. That would add about $57 to monthly benefits, raising them to $1,790 for the average recipient, according to the group’s estimates.

The cost of living adjustment is calculated based on an average of the inflation readings for the months of July, August and September. Specifically, it’s based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) published by the Bureau of Labor Statistics.

The CPI-W rose 3.6% in July and 3.4% in August.

Inflation rocketed to 40-year highs in 2022 in the wake of a combination of pandemic stimulus payments, an increase in shopping and spending, and widespread supply chain problems. That prompted the Federal Reserve to raise interest rates at a rapid pace. The benchmark U.S. interest rate is now the highest it’s been in more than 20 years.

That has slowed the economy somewhat in 2023 compared to last year, but inflation remains higher than it was throughout the 2010s.

While Social Security benefits rise annually, the Senior Citizens League contends that the cost of goods and services that retirees need is increasing much faster than benefits are.

The advocacy group says that problem is the most serious for older beneficiaries, as people who retired before 2000 would need an additional $500 in benefits every month just to get back the purchasing power they had in 2000.

The Senior Citizens League previously said the increase for next year could be as small as 2.7%.

While wages for U.S. workers have been growing and are starting to outpace inflation, that doesn’t help people who have retired and are no longer earning a paycheck. And the league argues that most people retire before they’re old enough to receive the full amount of Social Security benefits they would be entitled to.

The Social Security Administration is expected to announce the official COLA increase in mid-October.

Overall, the U.S. Consumer Price Index rose 3.7% in August, according to BLS data released Wednesday. Prices for consumers rose faster last month primarily because gas prices increased, but over the last year, the cost of shelter is up more than 7%. The cost of items like medications and medical equipment have continued to rise as well.