As fall approaches, it’s that time of year when retirees receiving Social Security benefits have a pressing question on their minds: “How much will my increase be next year?” The exact amount will not be known for another month. However, looking at monthly inflation data can give you a pretty good idea of what your next Social Security Cost of Living Adjustment (COLA) will be.
Contains the latest numbers. The current increase in social security is as follows.
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inflation is accelerating
Each month, the U.S. Bureau of Labor Statistics (BLS) releases a summary of the Consumer Price Index. This report provides a snapshot of inflation trends over the past month. Economists, including the Federal Reserve, are watching these numbers closely.
The main takeaway from the August summary is that inflation is heating up. The urban consumer price index (CPI-U), also known as the headline inflation indicator, rose 3.7% year-on-year and 0.6% month-on-month. This is the highest monthly rate of increase so far in 2023.
Most Americans probably won’t be surprised by the main cause behind rising inflation. Soaring gasoline prices accounted for more than half of the rise in headline inflation in August.
But gasoline wasn’t the only problem. Prices rose in several categories in August, including rent, car insurance, and medical care.
Impact on COLA
The higher the inflation rate, the higher the increase in Social Security. But the most important number for retirees in the latest BLS report is the Consumer Price Index for Urban Wage and Office Workers (CPI-W).
The Social Security Administration compares the average CPI-W for the third quarter of this year to the average CPI-W for the same period last year. If there is an increase, that percentage is rounded to the nearest tenth of 1% to determine the next year’s Social Security COLA.
You now have two of the three months of CPI-W data needed to calculate your 2024 Social Security increase. Based on current numbers, you’ll get a 3% benefit increase next year.
However, inflation typically rises from month to month. Assuming CPI-W increases at the same rate in September as in August, the next COLA will be 3.1%.
If Social Security were to increase by 3.1%, that would be a significant decrease from the 8.7% COLA received this year. However, it was an unusually high adjustment. The average Social Security COLA over the past 10 years has been about 2.6%.
One more month
The BLS is scheduled to release September inflation data on the morning of October 12, 2023. It shouldn’t be long before the Social Security Administration officially announces what the 2024 COLA will look like.
Retirees will soon find out how much their new Medicare Part B premiums will be next year. But don’t expect a decline like the one in 2023. The premium reduction was a fluke, caused by the Centers for Medicare and Medicaid Services (CMS) not reimbursing the Alzheimer’s disease drug Adduhelm.
CMS has already announced that it will cover another expensive Alzheimer’s disease drug, Requemby. These costs could cause Part B premiums to rise in 2024.