With only a month left before the official numbers are released, Social Security recipients are on pace to receive the smallest cost-of-living increase in three years.
The latest forecast from the nonpartisan The Senior Citizens League shows next year’s COLA will be 2.5%, based on a decline from 2% to 2.5% in consumer price data. A COLA of 2.5% would raise the average monthly benefit for retired workers by $48 to $1,920.
The Social Security Administration will announce the final COLA in October. It will be payable in January 2025.
While 2.5% is lower than the 3.2% received in 2023, TSCL said it wouldn’t be far from the historical norm. COLA has averaged about 2.6% over the past 20 years, ranging from no increases in 2008 and 2010 to highs of 14.3% in 1980. 2022′s increase of 8.7% was the highest in decades and came after 2021′s 5.9%.
COLAs, designed to prevent benefits from being eroded by inflation, are determined by data from the Consumer Price Index for Urban Wage Earners and Clerical Workers which tracks the average price of a basket of goods. The average CPI-W for the third quarter of the previous year is compared to the third quarter of the current year and, if there is no increase, there is no COLA.
If there is an increase in CPI-W, Social Security benefits will increase by the same percentage points.
Pushing for minimum COLA
Shannon Benton, TSCL’s Executive Director, said rising costs are behind the organizations’ push for a change to institute a minimum annual COLA.
“Ensuring that seniors have enough to feed and house themselves with dignity is a major reason why we advocate for a minimum COLA of 3%,” Benton said. “TSCL research shows that approximately two-thirds of seniors rely on Social Security for more than half of their monthly income, and 28% depend on it entirely.”
TSCL said higher costs of living are pushing older Americans to use more of their income just to pay bills. In the group’s 2024 Retirement Survey, 65% of seniors reported monthly expenses of at least $2,000 a month, up 55% from 2023. More seniors are spending at least $4,000-$6,000 a month as compared to 2023, while fewer are able to get by on $1,000 or less.
Nearly 80% of senior households in the 2024 survey reported their monthly budget for essential items like food, housing, and prescription drugs had grown over the last 12 months, with 63 % saying they’re worried that their income won’t be enough to cover these basic costs in the coming months.
