Predicted 2024 COLA May Be Lower Than 3%
Social Security Cost of Living Adjustment (COLA) Has Fallen to 4.5% in March
Synopsis: If inflation continues to fall at the current rate it appears that the COLA for 2024 will be lower than 3%. The financial impact of the past two years of inflation has had some far-reaching consequences, especially for modest and middle-income retirees. Medicare premiums and out-of-pocket costs are among the fastest-growing costs in retirement.
The rate of inflation, as measured by the Consumer Price Index that is used to calculate the Social Security cost of living adjustment (COLA), has fallen to 4.5% in March. If inflation continues to fall at the current rate it appears that the COLA for 2024 will be lower than 3%. Although easing inflation should relieve older consumers, new survey findings from The Senior Citizens League (TSCL) indicate that recent steep inflation has had long-lasting financial impacts on many older households making recovery difficult.
The good news is that the 8.7% COLA increase in 2022 exceeded the actual rate of inflation every month so far this year by an average of 2.6%. That's about $44.90 per month based on an average Social Security benefit of $1,694.00. But that so-called cushion is completely consumed by the $164.90 per month Medicare Part B premiums which are automatically deducted from Social Security benefits. (The average used here is the average benefit of all recipients, including retirees, widows/widowers, and the disabled.)
Research by The Senior Citizens League indicates that average benefits fell short of inflation by roughly $1,054 from January 2021 to December of 2022. Average benefits in 2023 have only recovered about $179.40 in total since the start of the year, and that's the amount before the deduction of the Part B premium.
The financial impact of the past two years of inflation has had some far-reaching consequences, especially for modest and middle-income retirees. The Senior Citizens League's new survey of 1,055 older participants found a sizable jump in the number reporting they have depleted a retirement account over the past 12 months, from 20 percent in the third quarter of 2022 to 26 percent in the first quarter of 2023. The survey also found that those who reported they carried debt on consumer credit cards for more than 90 days climbed to 45 percent - the highest level recorded by this survey despite the recent rise in interest rates.
How Much Do Older Adults Spend on Healthcare?
The answer to that turns out to be a lot more than the COLA accounts for. The index used to determine the annual COLA, the Consumer Price Index for Urban Wage Earners, and Clerical Workers (CPI-W), assumes consumers spend about 7 percent of their household budget on healthcare. But according to TSCL's latest Senior Survey, 60 percent of survey participants say they spend more than double that amount, at least 16 percent of their income on healthcare.
Here is why it matters: In many years, Medicare premiums and out-of-pocket costs are among the fastest-growing costs in retirement. An inflation measure that does not adequately measure and accurately accounts for the portion of income spent on healthcare tends to undercount the actual rate of inflation and shortchange the Social Security COLA.
Surveys by The Senior Citizens League find strong support for tying the COLA to an index that better reflects how older adults spend their incomes. In a recent survey of 1,429 participants, 72 percent support tying the COLA to the Consumer Price Index for the Elderly (CPI-E) to calculate the annual COLA. Based on February data the CPI-E is 6.5% vs. this time a year ago, compared to the CPI-W which is 5.8%. A difference of this magnitude is usually caused by higher housing and medical costs when energy prices are dropping.
Table Showing How Inflation is Taking a Toll on Older Americans
Which of the following financial actions have you taken over the past 12 months? (Survey participants were told to check all that apply.)
|Action||2020 – 2021-Q3||2021- 2022-Q1||2021-2022-Q3||2022-2023-Q1|
|Spent emergency savings||36%||50%||38%||49%|
|Depleted a retirement or savings account.||Not asked||21%||20%||26%|
|Refinanced a home mortgage.||10%||7%||6%||6%|
|Carried debt on a consumer credit card for more than 90 days.||Not asked||43%||35%||45%|
|Went back to work or have taken a new job.||10%||9%||8%||10%|
|Applied for a pharmacy assistance program for one or more expensive prescription drugs.||9%||15%||10%||9%|
|Used Good Rx coupons when cheaper than filling prescription through Part D or health plan||Not asked||Not asked||Not asked||25%|
|Applied for Medicare Savings Program or Medicare Extra Help to assist with medical and/or prescription drug costs.||11%||20%||13%||14%|
|Visited a food pantry or applied for SNAP benefits.||22%||47%||33%||35%|
|Applied for rental assistance.||5%||13%||9%||11%|
|Applied for real estate tax relief program||Not asked||6%||6%||8%|
|Applied for assistance with heating and cooling costs.||10%||25%||17%||21%|
|Moved in with family or shared housing costs with friend or family.||Not asked||Not asked||Not asked||10%|
|Provided food, transportation, cash, or other assistance to family members or others who need help.||Not asked||Not asked||23%||29%|
- The Senior Citizens League, April 12, 2023.
- Retirement Survey 2021 - 911 survey participants
- Senior Survey 2022 - 3,056 survey participants
- Retirement Survey 2022 - 1,028 survey participants
- Senior Survey 2023 - 1,055 survey participants
UPDATE JUNE 13th, 2023
By The Senior Citizens League
Inflation At Lowest Point Since March 2021 Social Security COLA for 2024 Could Be 2.7 %
New consumer price data indicates that inflation is at its lowest level since March 2021. That was the start of our recent 40-year storm of two back-to-back years of historically high consumer prices. The Senior Citizens League now estimates that the Social Security cost of living adjustment (COLA) 2024 could be 2.7 percent.
Inflation continues to slow. The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), the index that is used to determine the COLA, was up 3.6 percent year over year, the lowest level since March of 2021, when it was 3.0 percent. The average monthly rate of inflation continues to trend downward.
According to an ongoing survey by The Senior Citizens League, older consumers are reporting little improvement in their household spending yet. While the inflation rate has slowed, prices have remained high in certain essential spending categories. Sixty-two percent of survey participants report food costs as their fastest-growing cost. Housing costs are the biggest concern of 22 percent 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 amount older Americans received in their 8.7% COLAs. That difference theoretically should provide a modest temporary improvement in buying power of roughly $52 per month for a retiree with average benefits of $1,694.00. Inflation, however, was so severe in 2021 and 2022 that the average Social Security benefit fell behind by $1,054, leaving 53 percent of retirees doubting they will recover because household costs rose more than the dollar amount of their COLAs.
Cost-of-Living Adjustment (COLA) for 2024 Could Be 3.1%
This peer reviewed article relating to our U.S. Social Security section was selected for publishing by the editors of Disabled World due to its likely interest to our disability community readers. Though the content may have been edited for style, clarity, or length, the article "Predicted 2024 COLA May Be Lower Than 3%" was originally written by The Senior Citizens League, and published by Disabled-World.com on 2023/04/12 (Updated: 2023/06/13). Should you require further information or clarification, The Senior Citizens League can be contacted at seniorsleague.org. Disabled World makes no warranties or representations in connection therewith.
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Cite This Page (APA): The Senior Citizens League. (2023, April 12). Predicted 2024 COLA May Be Lower Than 3%. Disabled World. Retrieved October 4, 2023 from www.disabled-world.com/disability/social-security/usa/2024-cola.php
Disabled World is an independent disability community founded in 2004 to provide disability news and information to people with disabilities, seniors, their family and/or carers. See our homepage for informative reviews, exclusive stories and how-tos. You can connect with us on social media such as X.com and our Facebook page.
Disabled World provides general information only. The materials presented are never meant to substitute for qualified professional medical care, nor should they be construed as such. Funding is derived from advertisements or referral programs. Any 3rd party offering or advertising does not constitute an endorsement.