Social Security COLA Stalls by Declining Inflation in 2024

Social Security COLA stalls by declining inflation in 2024.Each year, the Cost of Living Adjustment (COLA) brings about changes to United States Social Security benefits, but the extent of these changes varies greatly. The COLA increase is directly tied to inflation, resulting in a different figure each year. Unfortunately, the exact increase for each year cannot be determined in advance.

The Consequences of Stagnant Inflation on Social Security Checks

When inflation remains stagnant, it can have both positive and negative implications. While stagnant inflation may be good news for some, it can be detrimental to certain retirees. The way the United States Government and Social Security calculate the COLA means that the resulting increase may not be sufficient for some beneficiaries.

A Record-High Increase in 2023, But Limited Growth Ahead

In 2023, we witnessed an unprecedented 8.7% increase in Social Security benefits. This marked the highest increase in a decade. Despite ongoing price hikes, future Social Security checks will not experience such a significant rise.

The reason for this lies in the timing of inflation. Although it may have surged up until a certain point, inflation is expected to remain calm and gradual during the critical period that affects the COLA calculation. Consequently, the increase in Social Security benefits will not match the previous steep rise due to stagnant inflation.

Anticipating the COLA Increase for 2024

It is still too early to accurately determine the COLA increase for 2024, but experts, including the Senior Citizens League, project a modest increase of no more than 3%. While this may be encouraging news under normal circumstances, the current situation deviates from the norm.

A General Surge in Prices and Its Impact

Price increases across the board have been observed, affecting various expenses for Americans. Unfortunately, this spells bad news for retirees relying solely on Social Security benefits as their source of income.

Therefore, it is evident that many citizens will not witness a fair increase in their benefits. This can largely be attributed to the method used by the government to calculate adjustments in retirement checks and other Social Security Administration (SSA) payments.

Understanding the Calculation of COLA Each Year

The COLA is calculated based on inflation rates during specific months of the year—namely, July, August, and September. While this may initially sound promising, the reality is quite different. If prices experienced the most significant surge in January and February of a given year, it will not be reflected in the subsequent COLA increase. Consequently, the resulting adjustment may fall short of meeting the expenses as intended.

The official announcement regarding the final COLA increase is made every October. By mid-October, we will learn the precise percentage increase for all Social Security payments in 2024.