Retirees just got a (small) raise: Social Security announces a 3.2% COLA
Starting in January, the average monthly Social Security check for retired workers will go up $59 – a much smaller cost-of-living adjustment than last year’s record 8.7% hike, reflecting a slowdown in inflation.
One of the few silver linings of high inflation in recent years is that Social Security recipients enjoyed substantial cost-of-living adjustments. Because of recent reductions in the inflation rate, however, this will not be the case in 2024.
The Social Security Administration announced today that starting in January, the average monthly Social Security check for retired workers will rise 3.2%, or $59, to $1,906. The annual increase is based on a Labor Department measure of what Americans paid for everyday items from July through September compared with a year ago.
“Retirees can rest a little easier at night knowing they will soon receive an increase in their Social Security checks to help them keep up with rising prices,” said Jo Ann Jenkins, CEO of AARP. “We know older Americans are still feeling the sting when they buy groceries and gas, making every dollar important. Social Security has been the foundation for financial security for hundreds of millions of people in our nation, and today’s announcement shows that it’s continuing to deliver on this promise.”
Social Security hasn’t kept up perfectly with inflation in recent years, in part because of the timing of the COLA calculation. In 2021, inflation was 7.8%, as measured by the December 2020 to December 2021 change in the consumer-price index for urban wage earners and clerical workers. Social Security’s 5.9% cost-of-living increase the next year didn’t fully compensate retirees for that surge, because inflation continued to accelerate after the COLA was announced in the fall of 2021.
Related: How low? A ‘significantly lower’ COLA increase on 2024’s Social Security benefits
The situation reversed when inflation started to trend down, said Alicia Munnell, an economist and director of Boston College’s Center for Retirement Research. This year’s 8.7% increase more than compensated for the 6.3% inflation in 2022, she said.
“When inflation is going up, you don’t get enough from the COLA,” Munnell said. “But as inflation stabilizes and starts going down, you get too much. Over the whole cycle, it equals out.”
Some experts argue that the Social Security COLA doesn’t reflect the true inflation rate that older Americans experience, given their particular spending patterns. For many retirees, next year’s COLA raise will be somewhat offset by higher premiums for Medicare Part B, which are typically deducted from benefit checks. Next year, the standard premium for Part B is projected to rise by $9.90 to $174.80 a month, according to estimates that Medicare trustees released in March.
Among Americans ages 65 and older, 40% rely on Social Security for half or more of their income, according to an AARP analysis of recent government data. About 14% of recipients in that age group depend on their benefits for nearly all their income, the analysis found.