When it comes to Social Security benefits, the only thing you can count on is change, especially with the annual cost-of-living adjustments (COLA). These changes help protect the purchasing power of your benefits as the cost of everyday goods and services rises over time.
The Social Security Administration (SSA) will announce next year’s COLA on October 10th. If you’re eager to know how much your benefits will increase, head to their official website (SSA.gov) and look for the “latest news” section. Here, the SSA will post an official press release detailing the new COLA, ensuring retirees stay informed and prepared.
Calculation
The COLA isn’t a random number but is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This index reflects the price changes in common goods and services, such as groceries, household supplies, and medical expenses, particularly affecting people living in urban areas.
To determine the COLA, Social Security averages the CPI-W data from July, August, and September of the current year and compares it to the same period of the previous year. If the average is higher, benefits increase proportionately. For example, if last year’s CPI-W average was 200 and this year it rises to 210, the COLA will be 5% because of the 10-point difference.
If the average remains unchanged or falls, benefits will stay the same—never decrease. There have been rare instances, like in 2010, 2011, and 2016, where no COLA was given. But generally, some level of increase occurs yearly.
| Year | CPI-W Average | Increase (%) | COLA Applied (%) |
|---|---|---|---|
| 2022 | 200 | 10 | 5 |
| 2023 | 210 | 0 | 0 |
COLA
The exact number will only be known once Social Security releases the official figure on October 10. However, advocacy groups like The Senior Citizens League (TSCL) often provide educated guesses based on inflation and CPI-W trends.
As of September 2023, TSCL estimates the COLA to be around 2.5%. This is slightly lower than their August estimate of 2.57%, and if correct, would be the lowest COLA since 2021’s 1.3%. It’s also below the average COLA of 3.9% over the past 50 years.
If inflation continues to moderate, retirees can expect a modest increase in 2024, making it important for those relying on Social Security to plan accordingly for potential smaller adjustments.
CPI-W
There’s ongoing debate about whether the CPI-W accurately reflects retirees’ actual spending. According to TSCL, Social Security benefits have lost about 20% of their purchasing power since 2010. That means $1 of benefits in 2010 is only worth 80 cents today, largely due to rising costs in areas like healthcare, which the CPI-W doesn’t adequately capture.
Many argue that the SSA should switch to the Consumer Price Index for the Elderly (R-CPI-E), which better represents expenses relevant to retirees, particularly medical costs. Healthcare is one of the biggest financial burdens seniors face, and the CPI-W often fails to account for the rapidly increasing costs of medications and medical services.
While no perfect metric exists, organizations like TSCL believe R-CPI-E would more accurately reflect the financial realities of retirees. For now, though, CPI-W remains the standard, and it’s unlikely to change in the near future.
Social Security
While it’s essential to keep an eye on COLA adjustments, there are other ways to boost your Social Security income. Many retirees overlook some of the lesser-known strategies that could significantly increase their monthly benefits. For instance, delaying your Social Security benefits past your full retirement age can lead to an 8% increase in benefits per year, up to age 70. This could add up to tens of thousands of dollars over time.
Other strategies include making sure you’re claiming the right spousal or survivor benefits or maximizing benefits if you continue working after retirement. These are simple tricks that can help boost your retirement income significantly, helping to ensure a more comfortable financial future.
As you prepare for the 2024 COLA announcement, take the time to understand your options and strategies to make the most of your Social Security benefits.
FAQs
When will Social Security announce the 2024 COLA?
On October 10, 2023.
How is the COLA calculated each year?
It’s based on the CPI-W inflation data.
Can Social Security benefits decrease if inflation falls?
No, benefits stay the same or increase.
What’s the estimate for the 2024 COLA?
TSCL estimates it to be around 2.5%.
Will Social Security change how it calculates the COLA?
It might, but CPI-W remains the standard for now.
