Social Security COLA Estimate Drops by 0.4% — Will It Cover Inflation?
A continued easing of the inflation rate could lead to the lowest Social Security cost-of-living adjustment (COLA) in three years, as a leading seniors organization now estimates that the 2024 COLA will be less than 3%. That estimate is based on the May 2023 consumer price index report, which was released on June 13.
The Senior Citizens League, a non-partisan advocacy group, noted in a press release that new CPI data “indicates that inflation is at its lowest level since March 2021” – before inflation soared to historically high levels.
The group now projects that the Social Security 2024 COLA could be 2.7%. That would be the lowest adjustment since 2021, when the COLA was 1.3%, according to the Social Security Administration.
The Senior Citizen League’s current estimate of 2.7% is down from 3.1% a month ago, following the April CPI report.
On June 13, the U.S. Bureau of Labor Statistics reported that overall inflation in May rose only 4.0% from the previous year, continuing a downward trend in recent months following peak inflation of 9.2% last year.
But even as the overall rate has moved closer to the Federal Reserve target rate of 2%, prices of some consumer goods continue to rise at a rapid clip. These include essentials that are important to Social Security recipients, such as food, electricity and housing.
The food-at-home index for May rose 5.8% over the last 12 months, pushed higher by a 10.7% increase in the index for cereals and bakery products. The index for food away from home climbed 8.3% from the previous year. Other gainers were the electricity index (up 5.9% from the previous year) and the shelter index (up 8.0%).
Meanwhile, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) — the index used to determine the COLA – rose 3.6% year over year. That was the lowest reading since March of 2021, when it was 3.0%.
“The average monthly rate of inflation continues to trend downward and has almost reached the historical ‘average’ rate of change,” The Senior Citizens League said.
Despite the declining inflation rate, an ongoing survey by The Senior Citizens League found that older consumers are reporting “little improvement” in their household spending yet.
“While the rate of inflation has slowed, prices have remained high in certain essential categories of spending,” according to the news release. “Sixty-two percent of survey participants report food costs as their fastest-growing cost. Housing costs are the biggest concern of 22% of survey respondents.”
The survey has 2,275 respondents through June 6, 2023.
Since January of this year, the actual inflation rate as measured by the CPI-W was lower than the 2023 COLA of 8.7%. In theory, this difference should provide a “modest temporary improvement in buying power” of about $52 per month for a retiree with average monthly benefits of $1,694, The Senior Citizen League reported.
But inflation was “so severe” in 2021 and 2022 that the average Social Security benefit fell behind by $1,054, leaving 53% of retirees “doubting they will recover because household costs rose more than the dollar amount of their COLAs.”
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