Social Security recipients are poised to receive a more substantial cost-of-living adjustment (COLA) in the coming year than initially anticipated, as inflation continues to surge for the second consecutive month.
Overview:
Social Security beneficiaries could see a COLA increase of approximately 3.2% in their monthly checks next year, a projection based on August’s inflation data. This data revealed that the consumer price index rose by 0.6% compared to the previous month and was up by 3.7% compared to the same period last year. Both figures exceed the July readings, underscoring the ongoing challenge of controlling high inflation.
In-Depth Analysis:
The annual Social Security COLA is determined using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) figures from July, August, and September. In August, the CPI-W reported a 3.4% increase.
If the projected 3.2% increase materializes, it would mark a significant decrease from the 8.7% COLA adjustment received in 2023, which was the highest in four decades. Nevertheless, it would still surpass the 2.6% average increase observed over the past twenty years. This potential increase would raise the average retiree benefit, currently at $1,790, by approximately $57.30 per month.
Despite the record-high COLA adjustment in 2023, many retirees are grappling with the challenges posed by high inflation. Mary Johnson, a research analyst at the Senior Citizens League, emphasized that the dollar amount of the COLA increase remains modest, with the average monthly retiree benefit at only $1,790 in 2023.
The Social Security Administration is set to announce the final adjustment percentage in mid-October.
Impact on Beneficiaries:
In 2023, the 8.7% benefit increase consistently exceeded the actual inflation rate by roughly 2.6% every month, equating to approximately $44.90 more per month for recipients. It’s important to note that this figure does not consider the Medicare Part B premium, which is directly deducted from Social Security checks.
The standard Part B premium for this year stands at $164.90, down from $170.10 in 2022. While the Medicare Trustees projected a monthly Part B premium of $174.80 in 2024, Johnson cautioned that this estimate does not factor in “significant new costs” that may arise after the forecast, such as coverage for a new Alzheimer’s drug.
The Senior Citizens League estimates that Medicare Part B premiums may actually rise to approximately $179.80 per month. Johnson further noted that additional expenses could push Part B premiums even higher.
In summary, Social Security recipients may be in line for a more substantial COLA adjustment next year, providing some relief amid rising inflation. However, the adequacy of this adjustment in light of escalating healthcare costs remains a concern for retirees. The final percentage will be eagerly awaited in October, as it will have a significant impact on the financial well-being of millions of Americans.
