The cost of living adjustment (COLA) in 2022 and 2023 for beneficiaries of the U.S. Social Security program were at the highest levels since 1981. Largely driven by historic levels of economic inflation, the heftier benefits were still outpaced by rising prices last year, but did provide beneficiaries with more cash.
But with inflation moderating — despite prices not falling — the COLA for 2024 could be much lower than it has been over the past two years, according to analysis from the Senior Citizens League (TSCL).
“The 2024 COLA could be around 3.1%,” said Mary Johnson, TSCL’s Social Security and Medicare policy analyst in a briefing document released this month.
At the end of 2021, about 70 million U.S. Social Security beneficiaries were given a 5.9% COLA increase, which at the time was the largest adjustment to Social Security benefit payments in the last 40 years. This change stemmed from an annual increase in the Consumer Price Index (CPI).
The Social Security COLA then rose 8.7% in 2023 to an average of $1,827 a month, again marking the highest COLA increase since 1981.
In spite of those historically large increases, rampant inflation throughout 2022 caused last year’s Social Security benefit increase to fall short, according to research from TSCL. And, inflation caused prices to outpace the payment increase every month in 2022, despite an average boost of $92.30, which increased the average monthly benefit to $1,656.30.
In turn, the buying power of Social Security benefits is at risk, according to TSCL.
“One year ago, [our] study found that Social Security benefits lost 40% of buying power since 2000,” the May 2023 briefing states. “That was the deepest loss in buying power since the start of this study in 2010. This year the study found that the loss of buying power slightly improved — by four percentage points — to 36%. However, that is still one of the deepest losses recorded by this study, exceeded only by the loss in 2022.”
In addition, the Social Security program continues to be a source of political debate by federal lawmakers. With projections expecting the Social Security trust fund to be exhausted at some point in the 2030s, lawmakers have debated ways to improve its solvency, including by raising the retirement age, which experts say could negatively impact today’s seniors.
The reverse mortgage industry and some financial professionals have aimed to position the products as a hedge against Social Security issues, whether it’s increasing the amount of cash flow for seniors or to delay the taking of benefits until age 70 to increase the monthly payout.
