September 13, 2023
With One More Month Left, COLA for 2024 Forecast to be 3.2%
The Social Security cost of living adjustment (COLA) for 2024 will likely be 3.2% based on a jump in consumer price data through August. A COLA of 3.2% would raise an average monthly retiree benefit of $1,790 by $57.30.
While a 3.2% COLA is significantly lower than the 8.7% received in 2023, the highest COLA in more than four decades, it’s higher than the average over the past 20 years — which was 2.6%. The Social Security Administration is expected to announce the COLA for 2024 in mid-October.
By law, the annual inflation adjustment is based on the average inflation during July, August, and September as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Inflation for these three months is added together and averaged, then compared with the third quarter average from one year ago. The percentage difference between the two is the amount of the COLA, which would be payable for the check received in January 2024. The 2023 COLA computation can be found on the Social Security website.
Older households report very modest spending despite the record COLA in 2023.
In 2023, retirees received the highest COLA in 40 years — (8.7%), but nobody is getting rich. The reality is that the dollar amount of the COLA increase received is meager at best, with the average monthly retiree benefit only $1,790 in 2023. According to TSCL’s latest Retirement Survey, 45 percent of those participating report spending less than $2,000 on monthly expenses in 2023, as detailed below in the following table.
How Much Do Retirees Spend Per Month In 2023?
|Less than $1,000||8%|
|$1,001 - $1,999||37%|
|$2,000 - $3,999||37%|
|$4,000 - $5,999||11%|
|More than $5,999||4%|
Source: The Senior Citizens League (TSCL) Retirement Survey, September 7, 2023, 2,258 responses.
Social Security benefits are modest, replacing roughly one-third of a middle earner’s average wages, according to an Actuarial Note from the Social Security Office of Chief Actuary. Making matters worse, most older adults claim Social Security benefits before reaching full retirement age and receive permanently reduced benefits according to TSCL’s Retirement Survey:
Most Retirees Are Getting Reduced Social Security Benefits
|Age at retirement and effect on benefits.||
|Claimed when younger than full retirement age and benefits were permanently reduced.||
|Claimed at full retirement age and receiving the full unreduced amount.||
|Claimed when older than full retirement age and receiving a higher benefit due to the 8% per year delayed retirement credit up to age 70.||
|Uncertain which statement applies.||
|Not applicable. Haven’t started benefits yet.||
Source: The Senior Citizens League (TSCL) Retirement Survey, September 7, 2023, 2,259 responses.
The bottom line for retirees won’t be known until Medicare premiums are announced, which is typically in November. The Social Security Administration automatically deducts Medicare Part B premiums from Social Security benefits before the benefits are received.
In its annual report released in March of this year, the Medicare Trustees forecast monthly Part B premiums to increase from $164.90 in 2023 to $174.80 in 2024. But that estimate doesn’t include any significant new costs that come up after the estimate is released. One of the most significant new costs could be Medicare’s coverage for another new Alzheimer’s drug —lecanemab, known by the brand name Leqembi, which is expected to cost $26,000 per year without insurance.
Based on Medicare Part B spending estimates, we forecast that the drug and related Part B services required to administer and monitor the patient for dangerous side effects of Leqembi would add about $5 per month to the Part B premium for everyone, potentially raising the 2024 premium to about $179.80 per month. Altogether, most beneficiaries may see their Part B premium rise by almost $15 per month from 2023. Other costs could drive Part B premiums even higher.