Social Security recipients got an 8.7% COLA for 2023. Forecasts say it may be stingier in 2024.
This year, the nation's 66 million Social Security recipients got their biggest benefit hike since 1981 — an 8.7% cost-of-living adjustment meant to help offset the highest inflation in four decades. But next year's benefit adjustment is shaping up to be much more meager.
Based on current inflation trends, retirees and other recipients may get a cost-of-living adjustment (COLA) of just 3.1%, according to the Senior Citizens League, an advocacy group for older Americans that closely tracks Social Security. That would make the 2024 COLA the smallest in three years, following this year's 8.7% hike and 2022's increase of 5.9%.
Inflation has been declining but still remains higher than 3.1%, with consumer prices rising 4.9% at an annual rate in April.
The 3.1% estimate is based on the 12-month average rate of the inflation index the Social Security Administration uses to adjust benefits annually. That index, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) — a basket of goods and services typically bought by workers — has been criticized as an inaccurate depiction of seniors' actual spending, given that older Americans tend to spend more on health care than younger workers, noted Mary Johnson, the Social Security and Medicare policy analyst at the Senior Citizens League.
"The trend has been a decline in the inflation rate, and that has been the case really since last June," when price increases hit a 40-year high of 9.1%, Johnson told CBS MoneyWatch.
She added that a COLA of 3.1% next year may hurt many seniors, especially given that more than half of older Americans said this year's large COLA hasn't yet made them whole, surveys by the league have found.
"About 53% say that their household expenses in 2022 rose by more than 8.7%, so they didn't feel their COLA adequately covered rising costs in the past year," Johnson noted.
Still, there are several months until the Social Security Administration announces its 2024 adjustment in October. The agency bases its COLA on the percentage increase in the CPI-W in the third quarter compared with the prior year. If there's no increase between the two figures, there's no COLA adjustment, the agency says.
Loss of buying power
Over the years, Social Security recipients have lost buying power, partly as the COLA may underestimate medical expenses and other costs that seniors incur, experts say.
That can compound over the years, eroding buying power for the oldest retirees in particular, Johnson said. Her analysis found that Americans who retired before 2000, who are now 85 or older, have lost 36% of their buying power in the past 23 years and would require an additional $6,200 annually to fully restore their benefits.
"That is a substantial sum of money," Johnson noted.
One proposal from Senator Bernie Sanders, an independent from Vermont, would require the Social Security Administration to use the Consumer Price Index for the Elderly (CPI-E), while also giving all recipients an automatic boost of $2,400 a year. However, with the House controlled by Republicans, it's unlikely that a bill to expand the retirement program would gain traction any time soon.
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Meanwhile, retirees are already fretting about next year's COLA, Johnson noted. About half of those surveyed by her group "are concerned the COLA of 2024 will run into the same situation — that it won't adequately cover their rise in costs," she noted.
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