Cooling inflation points to 3% Social Security COLA for 2024

investmentnews.com:

Social Security benefits are on track to increase by 3% in 2024, a response to cooling inflation that will dial back the annual cost-of-living adjustment from the much higher 8.7% implemented this year.

Figures for the consumer price index for urban wage earners and clerical workers, the CPI-W, published Thursday showed an increase of 2.6%, while the CPI for All Urban Consumers (CPI-U) increased in July by 3.2% year over year. The former is key, as it’s used by the Social Security Administration to calculate the COLA for the following year, with the average year-over-year inflation in July, August and September used as the basis for the calculation, according to projections from The Senior Citizens League.

The group estimates a 3% COLA increase based on an average rise in the CPI-W of about 3% since January. The Social Security Administration announces the coming year’s COLA in October.

Last year’s 8.7% increase was the biggest in 42 years. While inflation has calmed down this year, prices for many items have continued to rise at a pace that has put a strain on older Americans, according to July survey data published by The Senior Citizens League.

Of more than 1,700 people in the survey, 79% said that their monthly budgets for essentials like housing, food and prescriptions increased over 12 months, while 9% said those costs were steady, 7% said they went down and 5% were unsure.

Simultaneously, retirees increasingly pay taxes on their Social Security benefits, that survey found. This year, following a Social Security COLA of 5.9% for 2022, 23% of beneficiaries said they paid taxes for the first time on those payments, according to The Senior Citizens League. Given the 8.7% COLA for 2023, the group expects a higher