How low? A ‘significantly lower’ COLA increase on 2024’s Social Security benefits

Retirees this year received an 8.7% cost-of-living adjustment in their Social Security benefits, which was the largest increase in four decades. The 2024 increase, however, the declining rate of inflation points to a “significantly lower” COLA and may actually be less than half that percentage, according to a new estimate by The Senior Citizens League, a nonpartisan advocacy group.

The roughly 70 million people who rely on Social Security could receive a 3.1% COLA in 2024 (or possibly as low as 2% or less), the group estimates, based on April’s consumer inflation rate announced on Wednesday. For the average retiree who received a monthly check of $1,827 this year, this would mean an additional $56.64 a month in 2024, boosting the typical payment to $1,883.64.

“Without an accurate COLA that keeps pace with rising costs, beneficiaries lose purchasing power, especially over the course of a retirement that could last 25 to 30 years,” said Mary Johnson, the league’s policy analyst for Social Security and Medicare.

Related: What will average Social Security payments look like in 2030?

The 3.1% estimate is based on the 12-month average rate of the inflation index that the Social Security Administration uses to adjust benefits annually. That index, the Consumer Price Index for Urban Wage Earners and Clerical Workers — 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, Johnson said.

“The trend has been a decline in the inflation rate, and that has been the case really since last June,” she said. “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.”

A proposal from Sen. Bernie Sanders, I-VT, would require the Social Security Administration to use the Consumer Price Index for the Elderly 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 anytime soon.

Inflation has been declining but still remains higher than 3.1%, with consumer prices rising 4.9% at an annual rate in April. The next COLA will be announced in October and become effective in January 2024.