The Latest COLA Forecast: Here's How Much Social Security Benefits Could Increase in 2024

Social Security undergoes several important changes each year, the most anticipated of which is the cost-of-living adjustment (COLA). Rampant post-pandemic inflation led to unusually large COLAs of 5.9% in 2022 and 8.7% in 2023, but the latest inflation data from the Labor Department points to a smaller increase in Social Security benefits next year.

However, policy analyst Mary Johnson of The Senior Citizens League recently upped her COLA forecast to account for an acceleration in August inflation, and beneficiaries are still on pace to get an above-average raise in 2024.

Here are the details.

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How Social Security's annual cost-of-living adjustment (COLA) is calculated

Social Security payments get an annual cost-of-living adjustment (COLA) to offset the effects of inflation. Without that built-in protection, benefits would effectively lose value as prices trend higher across the economy over time. Case in point: $100 in Aug. 2013 has the same purchasing power as $131.28 in Aug. 2023, according to the Labor Department.

The size of the annual COLA depends on fluctuations in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), a metric that tracks how prices change over time across more than 200 spending categories. Specifically, the average CPI-W from July, August, and September of the current year is divided by the average CPI-W from the same months in the prior year, and any percent increase becomes the Social Security COLA in the following year.

Social Security benefits could increase 3.2% in 2024

The Social Security Administration cannot finalize the 2024 COLA without September inflation data, which is scheduled for release on Oct. 12 at 8:30 AM ET. But the Labor Department did publish August inflation data last week, meaning Social Security recipients now have a little more insight into how benefit payments could change next year.

The chart below details the CPI-W data points pertinent to the 2024 COLA calculation.

Data source: The Social Security Administration.

The chart above shows that CPI-W inflation accelerated to 3.4% in August, up from 2.6% in July. That upward momentum was primarily due to higher gasoline prices, and it prompted policy analyst Mary Johnson of The Senior Citizens League to increase her 2024 COLA forecast.

Johnson now expects Social Security benefits to increase 3.2% next year, an upward revision from her previous forecast of 3.0%. That number may seem paltry to some readers, especially after getting a colossal 8.7% COLA last year, but a 3.2% raise would still be above the 20-year average of 2.6%.

There is another silver lining to a 3.2% COLA: It falls below the 3.3% COLA the Board of Trustees used as a baseline assumption in its latest examination of the Social Security trust funds' financial health. The Social Security program is already facing a serious funding shortfall that could necessitate benefit cuts in 2034. A bigger-than-expected COLA in 2024 could accelerate that timeline. In fact, that happened after the 8.7% COLA in 2023.

What a 3.2% COLA means for Social Security beneficiaries

Generally speaking, Social Security provides income to four groups of beneficiaries: retired workers, spouses, survivors, and disabled workers. The average monthly benefit paid to each group in August is detailed below:

• Retired workers: $1,840.27
• Spouses: $889.61
• Survivors: $1,454.48
• Disabled workers: $1,486.83

Here is how the average benefit paid to each group would change if Social Security does indeed get a 3.2% COLA next year:

• Retired workers: $1,899.16 ($58.89 more)
• Spouses: $918.08 ($28.47 more)
• Survivors: $1,501.02 ($46.54 more)
• Disabled workers: $1,534.41 ($47.58 more)

Readers should remember the 3.2% COLA is not set in stone. The Social Security Administration will issue a press release with an official figure following the publication of September CPI-W data next month.