It’s that time of year when retirees receiving Social Security benefits have a pressing question on their minds as Fall approaches: “How much will my increase be for next year?” The exact amount won’t be known for another month. However, you can get a pretty good feel for what the next Social Security cost-of-living adjustment (COLA) will be by looking at monthly inflation data.
The latest numbers are in. Here’s how much your Social Security increase will be as things stand now.
Inflation is heating up
Every month, the U.S. Bureau of Labor Statistics (BLS) releases its consumer price index summary. This report provides a snapshot of inflation trends for the previous month. Economists, including those at the Federal Reserve, watch these numbers closely.
The main takeaway from the August summary is that inflation is heating up. The Consumer Price Index for All Urban Customers (CPI-U), which is sometimes referred to as the headline inflation metric, increased by 3.7% year over year and 0.6% from the previous month. That’s the highest monthly jump so far in 2023.
Most Americans probably won’t be surprised at the main culprit behind rising inflation. Higher gas prices accounted for more than half of the August headline inflation increase.
However, gasoline wasn’t the only issue. Prices climbed higher in August across multiple categories, including rent, motor vehicle insurance, and medical care.
Impact on your COLA
Higher inflation numbers translate to higher Social Security increases. The most important number for retirees in the latest BLS report, though, is the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
The Social Security Administration compares the average CPI-W for the third quarter of the current year against the average CPI-W for the same period in the previous year. If there’s an increase, the percentage is rounded to the nearest tenth of 1% to determine the Social Security COLA for the next year.
We now have two of the three months of CPI-W data needed to calculate the Social Security increase for 2024. Based on how the numbers look right now, you’ll receive a 3% benefits increase next year.
But inflation typically rises from month to month. If we assume that the CPI-W increases at the same rate in September as it did in August, the next COLA will be 3.1%.
A Social Security increase in the ballpark of 3.1% would be a big drop from the 8.7% COLA received this year. However, that was an unusually high adjustment. Over the last 10 years, the average Social Security COLA has been around 2.6%.
One month to go
BLS is scheduled to release the September inflation data on the morning of Oct. 12, 2023. It shouldn’t be long afterward for the Social Security Administration to officially announce what the COLA for 2024 will be.
Retirees could know even sooner what their new Medicare Part B premiums will be next year. Don’t count on a decrease like the one received for 2023, though. That premium decline was something of a fluke, caused by the Centers for Medicare and Medicaid Services (CMS) deciding against reimbursing for Alzheimer’s disease drug Aduhelm.
CMS has already announced that it will cover another expensive Alzheimer’s disease drug, Leqembi. Those costs are likely to push your Part B premiums higher in 2024.