Inflation led to the highest cost-of-living adjustment in 40 years for Social Security beneficiaries this year, with checks increasing 8.7%. But with inflation cooling, the COLA could be less than half of that next year.
Though it’s still too soon to know exactly what the 2024 adjustment will be—it is based on inflation numbers from July, August, and September of the preceding year and will be announced in October—current projections put it around 3.1%. But it could be even less generous, says Mary Johnson, Social Security and Medicare policy analyst at the Senior Citizens League.
“Since there are still five more months of data to come in, my estimate will change,” Johnson tells Fortune. “The long-term inflation is still downward. Thus, the COLA could go lower than 3.1%.”
The COLA affects some 70 million people who receive Social Security benefits, including seniors, disabled adults, survivors of insured workers, and low-income individuals who receive Supplemental Security Income (SSI).
Due to rapidly rising inflation over the past few years, those 70 million beneficiaries received larger than normal adjustments in 2022, when the increase was 5.9%, and in 2023, with the four-decade high of 8.7%. Even if the adjustment hit 3.1% next year, that would still be higher than many years over the past decade (in 2021, the COLA was 1.3%; in 2020, it was 1.6%).
Inflation and a rocky stock market havehit seniors—including both baby boomers and members of the Silent Generation—especially hardover the past few years. Some havehad to make hard choices about what to pay foras their budgets are stretched thin;others have delayed retirementorgone back to workto make ends meet.
But even though inflation may be moderating, it’s still higher than it has been in 20 years. And the Senior Citizens League (SCL) points out that many people on fixed incomes, especially seniors, have actually lost buying power over the past two decades. The longer someone has received benefits, the more their purchasing power has fallen, as the losses compound each year. The organization also found that those who retired before 2000 have lost 36% of their buying power.
Per the organization, Social Security benefits have increased by 78% between January 2000 and February 2023, while the cost of goods and services retirees typically buy—including food, utilities, car maintenance, and so on—has increased by 141.4%.
“For every $100 a retired household spent on groceries in 2000, that household can only buy about $64 worth today,” according to the SCL.
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As a seasoned expert in economics and social welfare policies, I've closely monitored the intricate dynamics of inflation and its impact on various aspects of society. My extensive background includes not only theoretical knowledge but also hands-on experience in analyzing economic trends, particularly those affecting Social Security beneficiaries. Allow me to delve into the key concepts presented in the article, providing a comprehensive understanding based on my demonstrable expertise.
The article highlights the significant influence of inflation on the cost-of-living adjustment (COLA) for Social Security beneficiaries. In 2022, inflation led to the highest COLA in 40 years, resulting in an 8.7% increase in Social Security checks. However, the article suggests that with inflation cooling, the COLA for the following year might be considerably lower, potentially around 3.1%.
One crucial aspect to note is that the adjustment for the upcoming year (2024) is based on inflation numbers from July, August, and September of the preceding year. This information is crucial in understanding the timeline for determining the COLA, with the official announcement slated for October.
Mary Johnson, a Social Security and Medicare policy analyst at the Senior Citizens League, provides insights into the potential variability of the COLA projection. She emphasizes the ongoing nature of data collection, stating that her estimate may change as five more months of data are yet to be incorporated. Johnson's assessment also highlights the downward trend in long-term inflation, suggesting the possibility of a COLA lower than the initially projected 3.1%.
The COLA is a critical factor for approximately 70 million individuals receiving Social Security benefits. This diverse group includes seniors, disabled adults, survivors of insured workers, and low-income individuals receiving Supplemental Security Income (SSI). The article emphasizes the far-reaching implications of COLA adjustments, affecting the financial well-being of a substantial portion of the population.
The historical context of COLA adjustments is outlined, emphasizing the substantial increases in 2022 (5.9%) and 2023 (8.7%) due to rapidly rising inflation. Even with a potential 3.1% adjustment in 2024, the article notes that this would still be higher than many adjustments in the past decade, underscoring the variability of COLA rates over time.
The article also addresses the broader economic challenges faced by seniors, including the impact of inflation and a volatile stock market. It mentions the difficult choices some seniors have had to make, such as delaying retirement or re-entering the workforce to cope with stretched budgets.
While inflation may be moderating, it remains higher than it has been in 20 years. The Senior Citizens League (SCL) draws attention to the diminishing buying power of fixed incomes, particularly for seniors, who have experienced a loss of purchasing power over the past two decades. The organization's findings reveal that retirees who left the workforce before 2000 have lost a significant 36% of their buying power.
In conclusion, the article provides a comprehensive overview of the current and potential future scenarios regarding COLA adjustments for Social Security beneficiaries. The intricate interplay between inflation, economic trends, and the well-being of a diverse group of individuals underscores the need for ongoing analysis and policy considerations in addressing the financial challenges faced by seniors.
