Social Security: Hurricanes Could Push This Year’s COLA Higher Than 3%
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Vance Cariaga
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Daria Uhlig
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The Social Security cost-of-living adjustment (COLA) for 2024 is almost certain to be much lower than this year’s COLA of 8.7%, with current projections calling for a 2024 COLA of about 3% based on recent inflation figures. However, that figure could push higher if the U.S. has an especially severe hurricane season.
The reason has to do with the impact hurricanes and tropical storms have on gasoline prices. Severe storms often disrupt oil and gas production and distribution, which sends gas prices higher — and those prices make up a key part of the inflation index used to calculate the Social Security COLA, CNBC reported.
Oil and gas disruptions look increasingly likely in coming weeks. Even before tropical storm Hilary launched its assault on southern California, researchers at the National Oceanic and Atmospheric Administration said there is a 60% chance of an “above-normal” Atlantic hurricane season, according to the National Weather Service.
Damaging storms in the Atlantic and Gulf Coast regions could lead to much higher prices at the pump, experts say.
“Certainly, hurricane season bears close monitoring, and we are entering the heart of it now,” AAA spokesman Andrew Gross told CNBC. “A major storm impacting the Gulf Coast and nearby refineries will likely lead to a spike in gas prices for a few weeks.”
To understand how this affects Social Security’s annual cost-of-living adjustment, it helps to know how the COLA is calculated.
The adjustment is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) during the third quarter each year. CPI-W changes for July, August and September are added together and averaged, then compared with the Q3 average from a year earlier. The percentage difference is the amount of the COLA, which would be payable in Social Security checks beginning in January 2024.
The CPI-W rate has been on a steep decline this year along with overall inflation, leading to much lower COLA projections for 2024. In an Aug. 10 press release, The Senior Citizens League predicted that the COLA for 2024 is “looking increasingly like it may be around 3%” based on CPI data.
The Senior Citizens League will issue its final 2024 COLA estimate on Sept. 13, 2023. The official COLA announcement is expected to be Oct. 12.
By then, hurricane season might have already changed the CPI-W because that index is heavily weighted toward oil and gas prices, according to Mary Johnson, TSCL’s Social Security and Medicare policy analyst.
“The COLA estimate will go up if the price of gasoline jumps considerably,” Johnson told CNBC in an interview last week. “The COLA estimate might go down if gas and oil prices drop.”
Even if the 2024 COLA creeps above 3%, many seniors will still have a hard time paying for essentials such as food, healthcare and housing because prices for many of those items have risen higher than overall inflation.
“Economists are saying inflation is moderating and things are getting better, but consumers are still faced with high prices,” Johnson said.
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