Social Security recipients are on track to receive a cost-of-living adjustment (COLA) next year that is bigger than previously expected after inflation accelerated for the second month in a row.
The Senior Citizens League, a nonpartisan group that focuses on issues relating to older Americans, estimated the adjustment could be about 3.2%, based on August inflation data, which showed the consumer price index climbed 0.6% from the previous month and is up 3.7% from the same time last year. Both figures are higher than the July readings, underscoring the challenge of taming high inflation.
The annual Social Security change is calculated based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, or the CPI-W, from July, August and September. The CPI-W posted a 3.4% increase in August.
Should Social Security beneficiaries see a 3.2% increase in their monthly checks next year, it would mark a steep decline from 2023, when recipients saw an 8.7% bump – the highest in four decades. However, it remains higher than the 2.6% average increase recorded over the past two decades.
An increase of that magnitude would raise the average retiree benefit of $1,790 by about $57.30 per month.
Even with last year's record-high increase, many retirees say they are struggling to keep up with high inflation, according to Mary Johnson, a research analyst at the Senior Citizens League who conducted the analysis.
"Nobody is getting rich," Johnson said. "The reality is that the dollar amount of the COLA increase received is meager at best, with the average monthly retiree benefit only $1,790 in 2023."
The Social Security Administration will release the final adjustment percentage in mid-October.
This year's 8.7% benefit increase has exceeded the actual rate of inflation every month so far in 2023 by about 2.6%, according to a previous analysis conducted by the group, or roughly $44.90 per month. That's the amount before taking into account the Medicare Part B premium, which is automatically deducted directly from Social Security checks.
The standard Part B premium is $164.90 this year, down from $170.10 in 2022. In its annual report released earlier this year, the Medicare Trustees forecast that monthly Part B premiums will increase to $174.80 in 2024. However, Johnson noted that the estimate does not include "significant new costs" that come up after the estimate is released, such as the coverage for a new Alzheimer's drug.
The Senior Citizens League estimates that Medicare Part B will actually cost closer to $179.80 per month.
"Altogether, most beneficiaries may see their Part B premium rise by almost $15 per month from 2023," Johnson said. "Other costs could drive Part B premiums even higher."
The group has pushed Congress to adopt legislation that would index the adjustment to inflation specifically for seniors, such as the Consumer Price Index for the Elderly, or the CPI-E. That index specifically tracks the spending of households with people aged 62 and older, and is more encompassing of their expenses – which includes Medicare premiums and out-of-pocket health care costs.
"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," Johnson said.