For seniors on a fixed income, today’s news that inflation is continuing to cool is bittersweet. That’s because even as the rate of price increases is slowing down, the annual cost-of-living adjustment (COLA) for Social Security payments is likewise expected to be lower this year, too.
The latest COLA forecast from The Senior Citizens League (TSCL), a nonpartisan advocacy group, anticipates that Social Security payments will increase only 2.5% next year. (The official COLA announcement is expected in early October.) Last year’s COLA was 3.2%, and the year before, it was 8.7% as the U.S. grappled with rising prices.
But with today’s Consumer Price Index (CPI) announcement showing that annual inflation has slowed to 2.5%—still higher than the 2% target, but much lower than the roughly 9% peak seen during the summer of 2022—next year’s COLA should be the lowest in several years.
In all, it means that those depending on Social Security to make ends meet may have a more difficult time doing so next year, as the COLA won’t be as robust as it’s been in recent years—even as prices remain elevated. If next year’s COLA does come in at 2.5%, as forecast, it would amount to an average increase of $48 per month for Social Security recipients.
“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%,” said Shannon Benton, TSCL’s executive director, in a statement. “TSCL research shows that approximately two-thirds of seniors rely on Social Security for more than half their monthly income, and 28% depend on it entirely.”
Annual COLA adjustments are determined by averaging inflation data from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) during the months of July, August, and September, and comparing it to the average from the preceding year. The adjustment is ultimately determined and announced in October and goes into effect for December benefit payments.
But again, even though progress has been made in slowing inflation, those on a fixed income and largely dependent on Social Security are still wrestling with the price increases of the past couple years, and a relatively small COLA may not be enough for many to bridge the gap—putting some seniors in increasingly fraught financial positions.