Five more days. That's how much time remains before retirees will find out how much their Social Security benefits will be for 2024. The Social Security Administration (SSA) only needs one more piece of information to lock down the percentage -- and it will be available on Oct. 12.
The Social Security cost-of-living adjustment (COLA) countdown is on. Here's how much your increase is likely going to be.
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How COLAs are calculated
COLAs are intended to help Social Security recipients deal with rising costs. The higher inflation is, the higher the benefit increase will be.
However, the SSA doesn't use the inflation numbers typically included in reports you see online and on TV. Those figures are based on a metric called the Consumer Price Index for All Urban Consumers (CPI-U). Social Security adjustments are based on another, more specialized inflation measurement -- the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
The SSA also only cares about the CPI-W levels during part of the year. The agency calculates the difference between the average CPI-W of the third quarter compared to the average from the same period in the prior year and rounds it to the nearest one-tenth of 1%.
In most years, higher costs of living result in a Social Security benefits increase. It's possible, though, that those costs declined year over year. When that happens, the SSA doesn't adjust the amount paid to Social Security recipients at all.
Where things stand now
The SSA needs six numbers to calculate the COLA percentage: the three CPI-W values from the third quarter of the previous year and the three CPI-W values from the third quarter of the current year. The agency already has five of those figures and only awaits the release of the CPI-W for September 2023.
There are several ways to guess what that missing CPI-W number will be. One is to assume that inflation remains constant between August and September. If that's the case, next year's Social Security COLA will be 3.1%.
Another option is to expect inflation will rise in September 2023 by roughly the same level it rose between August and September of last year. That would also result in a Social Security increase of 3.1%.
However, inflation has risen faster in recent months than it did during the same period in 2022. Because of this trend, the nonpartisan seniors group the Senior Citizens League forecasts that next year's COLA will be 3.2%.
One other consideration
It's reasonable to expect that the Social Security benefits increase for 2024 will be in the ballpark of 3.2% -- perhaps a little lower, or perhaps a little higher. Whatever the final number is, it's going to be much lower than the 8.7% increase received for 2023.
But there's another factor that could make a difference in how much retirees actually see hit their bank accounts. If you're enrolled in Medicare Part B, your monthly premiums will be automatically deducted from your Social Security payment. Medicare hasn't announced yet what the premiums for 2024 will be, but they're likely to be well above the 2023 level.
The Senior Citizens League projects that Part B premiums will increase by around 9% next year. Medicare's coverage of a new Alzheimer's disease drug will add significantly to Medicare's costs.
The countdown until the Social Security COLA amount is revealed will be over in just a matter of days. It could be a few more weeks, however, before we know what the Medicare Part B premiums for 2024 will be.
