A lot decrease than earlier years, however COLA has totally protected retirees towards ravages of inflation.

The hypothesis appears to start out earlier yearly.  I simply bought my first press name concerning the doubtless magnitude of Social Safety’s cost-of-living adjustment (COLA) for 2024.  This computerized indexing of advantages to maintain up with rising costs – all the time an exquisite characteristic of our Social Safety program – has been notably useful over the previous couple of years as we have now skilled excessive charges of inflation.  

Because the COLA first impacts advantages paid after January 1, Social Safety must have figures out there earlier than the top of 2023.  In consequence, the adjustment for 2024 will probably be primarily based on the rise within the CPI-W for the third quarter of 2023 over the third quarter of 2022.  We all know the 2022 quantity (see Determine 1), however we’d like knowledge for July, August, and September to calculate the third quarter common for 2023.  All we have now to date is the June quantity.

The one choice is to make some assumptions.  As a place to begin, Desk 1 reveals what the COLA for 2024 could be if the CPI-W remained at its June stage for the subsequent three months – a most unlikely occasion.  Extra cheap choices have the CPI-W rising by a median of 0.2 share factors, 0.4 share factors, and 0.6 share factors, respectively, in July, August, and September.  This train suggests a 2024 COLA between 3.0 % and three.8 %.  For now, I’m going with 3.4 %.

The vary of estimates is consistent with the three.3 % COLA projected by the Social Safety actuaries within the 2023 Trustees Report and properly beneath final 12 months’s COLA of 8.7 % (see Determine 2).

My greatest guess is the 2024 COLA will probably be roughly consistent with 2024 inflation.  In distinction, the COLA over the past two years has been out of sync with precise inflation: too low a COLA in 2021 and too excessive a COLA in 2022 (see Desk 2).  This sample is the inevitable results of a backward-looking calculation.  However it makes excellent sense to base the COLA on precise knowledge relatively than a forecast, which might contain fixed corrections for over- or under-predicting.  And most significantly, over the entire inflation cycle, retirees have acquired the suitable enhance.