Senior advocacy group analysts have just released Social Security cost-of-living adjustment projections for next year, coming up with a range of 3.4% to 3.6%, after the government released consumer price index data today. The actual figure is scheduled to be announced in mid-October.
These latest figures are lower than previous analysts’ forecasts of between 3.6% and 3.8%.
The projection is based on the latest consumer price data, which showed the annual inflation rate up 0.1% in July and 3.4% from the previous year, on a seasonally adjusted basis, according to the Bureau of Labor Statistics.
The Social Security cost-of-living adjustment is calculated on one of the bureau’s well-known measures of consumer price inflation, the Consumer Price Index for Urban Wage Earners and Clerical Workers (or CPI-W). Last year, beneficiaries saw an increase of 2.8%.
“One of the biggest challenges this year has been the sharp swings in inflation. It started at 2.2% in January, climbed to 4.4% in May, then fell to 3.5% in June,” noted Shannon Benton, executive director of the Senior Citizens League, a nonpartisan Virginia-based advocacy group. “Fortunately, our model is designed not to overreact to these swings, keeping our COLA projections relatively steady.”
The league’s 3.6% projection would mean average Social Security benefits increase by $69.75 to $2,007.28. Benton said that would be the highest in four years. The adjustment was 8.7% in 2023.
Benton said, however, that the cost-of-living adjustment does not accurately reflect the real-world expenses of seniors. “Frankly, it’s infuriating that seniors must wait for a COLA to catch up with prices that have already driven up their grocery bills, housing costs, healthcare expenses and insurance premiums. A higher COLA is welcome, but seniors shouldn’t have to lose purchasing power year after year before Washington acknowledges what they’re experiencing.”
Mary Johnson, an independent policy analyst focusing on Social Security and Medicare, agreed with Benton. “It’s doubtful that anyone is celebrating,” Johnson said in a statement.
With the latest data, Johnson own estimates are that the cost-of-living adjustment will be 3.4%. “July’s data is important to pay attention to because it’s used in calculation of the final COLA that will be announced in October,” she said.
The annual cost-of-living adjustment, she explained, is based on inflation data in the third quarter including the months of July, August and September. “The Social Security Administration adds the inflation for each month together, determines the average and compares that to the average from the fourth quarter a year ago. The percentage of change in the CPI-W is used to determine the COLA adjustment payable with the check received in January of the following year,” Johnson said.
She added that Medicare recipients will also need to be on the lookout for future changes in coverage. “Consumer price data indicates that prescription drug costs have gone down by 3.1% for all adult consumers but that may not necessarily remain that way for Medicare recipients in 2027,” she said.
Johnson also said that “a new Medicare Part D inflation rebate program created by the 2022 Inflation Reduction Act is not generating the level of savings that government economists anticipated.”