Cost-of-Living Adjustment (COLA) for 2024 Could Be 3.1%

Social Security Benefits Have Lost 36% of Buying Power Since 2000

Author: The Senior Citizens League (TSCL)
Published: 2023/05/10 - Updated: 2023/06/13 - Peer-Reviewed: Yes
Contents: Summary - Introduction - Main - Related

Synopsis: Declining rate of inflation points to a significantly lower COLA for next year, after the 8.7% COLA in 2023 the highest in 40 years. This year the study found that the oldest adults, especially those (age 85 and older) who retired before 2000, have lost 36 percent of their buying power. The study confirms that the prices older consumers are paying simply are not growing as fast as a year ago, but many prices on key items through February 2023 remain stubbornly high.

Introduction

Research on the buying power of Social Security benefits by The Senior Citizens League (TSCL) confirms that inflation is moderating. But a lower inflation rate has not necessarily meant that prices have come down. This year the study found that the oldest adults, especially those (age 85 and older) who retired before 2000, have lost 36 percent of their buying power. These retirees would need an extra $516.70 per month ($6,200 in 2023) to maintain the same level of buying power as in 2000. This study confirms that the prices older consumers are paying simply are not growing as fast as a year ago, but many prices on key items through February 2023 remain stubbornly high.

Main Digest

The declining rate of inflation points to a significantly lower COLA for next year, after the 8.7% COLA in 2023 - the highest in four decades.

"The 2024 COLA could be around 3.1%," says The Senior Citizens League's Social Security and Medicare policy analyst, Mary Johnson.

The buying power of Social Security benefits can erode when the annual cost of living adjustment (COLA) fails to keep pace with rising costs. But in some years, buying power can improve modestly when inflation moderates. One year ago, this study found that Social Security benefits lost 40% of buying power since 2000. That was the deepest loss in buying power since the start of this study in 2010. This year the study found that the loss of buying power slightly improved - by four percentage points - to 36%. However, that is still one of the deepest losses recorded by this study, exceeded only by the loss in 2022.

Nothing Beats Eggs!

This study compares the growth in the COLA since 2000 with increases in the price of 38 goods and services typically used by retirees over the same period. This year buying power was most impacted by sharp increases in food items, electricity, rental housing, repair and maintenance costs of motor vehicles, and a 16% increase in the cost of dental care. (Medicare does not cover routine dental services.) Topping our list of fastest-growing items? Eggs. No other spending item on the list grew faster during the survey reference period, which compared the average price change from February 2022 to February 2023. (See Tables 1 & 2).

Without an accurate cost of living adjustment (COLA) that keeps pace with rising costs, beneficiaries lose purchasing power, especially over the course of a retirement that could last 25 to 30 years. This loss is cumulative and grows deeper as retirees age. It can cause significant hardships, including more rapid depletion of savings than expected, growing debt, and worse health outcomes. In short, a significant deterioration in an older household's standard of living.

Between January 2000 and February 2023, Social Security COLAs increased benefits by 78 percent, averaging 3.4 percent annually. But the cost of goods and services purchased by typical retirees rose by 141.4 percent averaging about 6.2 percent annually over the same period. For every $100 a retired household spent on groceries in 2000, that household can only buy about $64 worth today.

Table 1. Ten Fastest Growing Costs of Older Americans Since 2000

Ten of the fastest-growing costs since 2000. Where no average prices are available, numeric values from the U.S. Bureau of Labor Statistics CPI-U are used.

Cost in Jan. 2000Cost in Feb. 2023Percent Increase
ItemAverage cost $ or numeric data*Average cost $ or numeric data*Since 2000
Eggs, Grade A, large (doz.) $0.98 $4.21 332%
Prescription drugs, out-of-pocket $1,102.00 $4,524.03 311%
Heating oil (gal.) $1.15 $4.34 279%
Dental services, general visits $286.00 (annual) out of pocket $1,073.00 275%
Medicare Part B premiums, standard monthly $45.50 $164.90 262%
Homeowner's insurance (annual) $508.00 $1,489.14 193%
Pet services, including veterinarian services 109.300* 317.279* 190%
Total medical expenses included uncovered costs (annual) 5,844.00 $16,192.00 177%
Propane gas (gal.) $1.01 $2.70 167.30%
Gasoline, all grades (gal.) $1.31 $3.50 167.10%

*Source U.S. Bureau of Labor Statistics, data through February 2023. Where no average prices are available, numeric data are used.

Table 2. Fastest Growing Costs of Older Americans February 2022 – February 2023

Ten fastest-growing costs from February 2022 to February 2023 among our list of 38 items.

Cost in Feb. 2022Cost in Feb. 2023
ItemAverage cost $ or numeric data*Average cost $ or numeric data*Percent increase since Feb. 2022
Eggs, Grade A, large (doz.) $2.01 $4.21 110%
Apples, all varieties (lb.) $1.68 $2.09 24%
Bread, white (loaf) $1.61 $1.90 18%
Coffee (lb.) $5.41 $6.35 17%
Dental visits, out of pocket, over 65 $1,029.55 $1,073.82 16%
Electricity (kilowatt hr.). $0.15 $0.17 13.30%
Motor vehicle maintenance and repair $329.992* $372.572* 13%
Pets and pet products $192.89 $213.86 11%
Chicken (lb.) $1.72 $1.89 10%
Rental housing 361.083* 391.141* 8%

*Source U.S. Bureau of Labor Statistics, data through February 2023. Where no average prices are available, numeric data are used.

Why would failing to come to an agreement on the debt limit affect the payment of Social Security benefits?

Beneficiaries are legally entitled to full scheduled benefits under the Social Security Act. But according to a recent issue brief from the Congressional Research Service, another law, the Antideficiency Act, prohibits government spending in excess of the available funds.

The Social Security Administration (SSA) would not have the legal authority to pay Social Security benefits in full or on time should the trust funds fall short due to a delay in an agreement over the debt limit. No law provides the specific actions the SSA must take to ensure that Social Security benefits are paid in full and on time.

According to the Social Security Trustees' most recent annual report, the Social Security Trust Fund is the largest government holder of U.S. debt - an estimated $2.8 trillion. Social Security benefits are paid for by law from the Social Security Trust Fund. When employers send in payroll tax revenues and the U.S. Treasury receives federal income taxes from the taxation of Social Security benefits, the Treasury issues special non-marketable bonds in the funds to Trust Fund. In other words, the U.S. government "borrows" those funds.

In return, the Social Security Administration depends on "the net interest" earned by the special bonds and payroll tax revenues to pay the Social Security benefits of today's retirees in full and on time. The Social Security Trustees recently estimated that the Retirement and Survivors Trust Fund would receive about $66.4 billion in net interest in 2023. That money comes from the Federal General Budget and is subject to the debt limit.

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.

Predicted 2024 COLA May Be Lower Than 3%

Attribution/Source(s):

This peer reviewed publication titled Cost-of-Living Adjustment (COLA) for 2024 Could Be 3.1% was selected for publishing by Disabled World's editors due to its relevance to the disability community. While the content may have been edited for style, clarity, or brevity, it was originally authored by The Senior Citizens League (TSCL) and published 2023/05/10 (Edit Update: 2023/06/13). For further details or clarifications, you can contact The Senior Citizens League (TSCL) directly at seniorsleague.org Disabled World does not provide any warranties or endorsements related to this article.

Related Publications

Share This Information To:
𝕏.com Facebook Reddit

Page Information, Citing and Disclaimer

Disabled World is an independent disability community founded in 2004 to provide news and information to people with disabilities, seniors, their family and carers. We'd love for you to follow and connect with us on social media!

Cite This Page (APA): The Senior Citizens League (TSCL). (2023, May 10 - Last revised: 2023, June 13). Cost-of-Living Adjustment (COLA) for 2024 Could Be 3.1%. Disabled World. Retrieved June 24, 2024 from www.disabled-world.com/disability/social-security/usa/Cola-23-3-1.php

Permalink: <a href="https://www.disabled-world.com/disability/social-security/usa/Cola-23-3-1.php">Cost-of-Living Adjustment (COLA) for 2024 Could Be 3.1%</a>: Declining rate of inflation points to a significantly lower COLA for next year, after the 8.7% COLA in 2023 the highest in 40 years.

Disabled World provides general information only. Materials presented are never meant to substitute for qualified medical care. Any 3rd party offering or advertising does not constitute an endorsement.