Social Security cost-of-living adjustment could be 3% — or lower — next year
Seniors and millions of others on Social Security receive an annual cost-of-living adjustment (or COLA) designed to adjust their monthly checks to inflation. Next year, that COLA could drop to 3% — or even less — based on recent inflation trends, according to a preliminary estimate by the Senior Citizens League.
The estimate is based on the 12-month average rate of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), a basket of goods and services typically purchased by workers, Mary Johnson, Social Security Policy Analyst at the Senior Citizens League for Medicare & Medicaid.
It noted that the 12-month average has been declining, even when inflation rose month-on-month as it did in January. While inflation trends may be changing, price increases are now slowing despite remaining well above the Federal Reserve’s annual target of 2%.
“Based on February inflation data, the COLA looks like it will be below 3% and could fall into the 2% or lower range by the third quarter if the 12-month average declines. continues,” he said in an email to CBS. MoneyWatch added that its group will release an official forecast for the 2024 COLA in May.
Social Security Administration Says that It bases its COLA on the percentage increase in CPI-W in the third quarter over last year. If there is no increase between the two figures, there is no COLA adjustment, the agency says.
“It’s important to remember that inflation in 2022 was at a 40-year high,” Johnson noted. “Even a COLA has to be there. [in 2024]Inflation will increase.”
He added, “There’s every chance it won’t. I’d be happy if there’s a modest COLA, and then at the end of the year inflation turns negative and prices fall back to a more normal growth pattern.” are.”
The smallest after 2020?
Ahead of price increases in 2021 and 2022, the 3% COLA would be the smallest adjustment amount since 2020 that has strained household budgets and eroded the purchasing power of Social Security recipients. People on Social Security get a COLA of 8.7% in 2023, the largest in four decades, yet some seniors say Not enough To keep them ahead of inflation.
“Food prices remain high and a concern,” Johnson noted. “Housing inflation is still working its way through the system.”
“I am expecting some improvement in purchasing power, but the slow moderation in prices may not have much impact earlier in the year,” she added.
Inflation rates rose around the US. 6% annual rate In February, the cold from the previous month is still stubbornly high. According to the latest official data, the CPI-W rose at an annual rate of 5.8% last month.
Johnson, whose forecasts are accurate to within a few tenths of a percent of the official COLA, said she relies on available U.S. Labor Department data for CPI-W, rather than estimates from the Fed or others. Economists
Economists expect inflation to average 4% in 2023, according to forecasts compiled by financial data company FactSet. Many expect inflation to moderate over the course of the year, with Goldman Sachs forecasting that inflation will fall to an annual rate of 3.7% in December.