While the Social Security Administration (SSA) has yet to declare an official date, actions from the previous year allow us to predict an essential date for beneficiaries of the program. For those concerned about changes in Social Security, rest assured that this upcoming alteration will likely be to your advantage, and you may even appreciate this early notice.
This anticipated update is related to the Cost of Living Adjustment (COLA), a calculation closely watched by Social Security recipients. Though the SSA hasn’t officially announced the date, it’s expected that the announcement may follow the timing of last year’s notice. If the prediction is accurate, the COLA news should arrive on October 12, 2023, exactly 10 weeks from now.
Anticipating the Announcement: Key Dates and Details for 2024’s Social Security COLA Adjustment
The date for this year’s COLA, which will impact benefits for 2024, hasn’t been confirmed by the SSA, but it’s advisable to mark your calendars for the week between October 9th and October 13th. Prepare to take note, as in 10 weeks, we expect one of the most eagerly awaited updates for those relying on Social Security.
This earmarked timeframe isn’t randomly chosen. The SSA uses the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the third quarter to set the COLA. On October 12th, the Bureau of Labor Statistics (BLS) typically releases the monthly CPI-W figures, a day that may reveal the adjustment for the following year.
Considering the SSA usually takes little time to crunch the numbers and announce the COLA after the BLS publication, October 12th appears to be the likely date for the big reveal. BLS consistently reveals monthly CPI data at 8:30 am ET.
While it seems feasible to guess the announcement date, it’s not possible to pinpoint the exact adjustment amount. Based on the monthly CPI-W figure for the third quarter, the 2024 COLA could be roughly 2.3%. This figure is lower than the anticipated 3% increase projected by The Senior Citizens League, a non-partisan seniors’ advocacy group, a few weeks earlier.
However, the final figure isn’t set in stone. Despite inflation slowing down in recent months, it continues to be a factor. What seems almost definite is that the 2024 COLA will be much lower than the 8.7% increase applied for the current year.
How is the Social Security COLA calculated?
The Social Security Cost-of-Living Adjustment (COLA) is calculated based on the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of the last year a COLA was determined to the third quarter of the current year. The CPI-W is a measure of consumer prices for a variety of household goods and services, calculated on a monthly basis by the Bureau of Labor Statistics.
- Choose the right inflationary tether: The COLA calculation uses the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) as a measure of inflation.
- Locate the only months of importance: Only the CPI-W values for the third quarter (July, August, and September) of the year are used for the COLA calculation.
- Determine your baseline reading from the third quarter of the previous year: The average CPI-W value for the third quarter of the previous year is calculated by adding up the CPI-W values for July, August, and September, and then dividing the sum by three.
- Calculate the average CPI-W reading for the third quarter of the current year: The same process is followed for the current year’s third quarter CPI-W values.
- Compare the figures: If the average CPI-W reading for the third quarter of the current year is higher than that of the previous year, it indicates inflation. If the current year’s reading is lower or equal to the previous year’s reading, it indicates deflation or no inflation, in which case there would be no COLA for the year.
- Calculating the size of next year’s COLA: The difference between the current year’s and the previous year’s average CPI-W readings is calculated. This difference is then divided by the previous year’s average reading and multiplied by 100 to arrive at the percentage increase, which is the COLA for the next year.
- Time to round your result up or down: The COLA percentage is then rounded to the nearest tenth of one percent.
It’s important to note that a COLA increase is not guaranteed. If there is no inflation in a given year, there will be no cost-of-living adjustment to benefits the following year. Also, when there is a cost-of-living increase, you might not see all of it in your benefit payment. If your Medicare Part B premiums are deducted from your Social Security, a Medicare rate increase could offset the COLA.
What is the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W)?
The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) is a variant of the Consumer Price Index, produced by the Bureau of Labor Statistics in the United States. It is one of the CPI databases and is constructed using the spending habits and experiences of urban wage earners and clerical workers.
The CPI-W is a statistical estimate constructed using the prices of a sample of representative items whose prices are collected periodically. It is designed to measure the average change over time in the prices paid by urban wage earners and clerical workers for a market basket of consumer goods and services.
Subpopulations like the CPI-W are used for specific needs. For example, Social Security cost-of-living adjustments are tied to the CPI-W.
The CPI-W includes expenditures by urban wage earners and clerical workers households that are included in the CPI-U definition that meet two requirements: more than one-half of the household’s income must come from clerical or wage occupations, and at least one of the household’s earners must have been employed for at least 37 weeks during the previous 12 months.
The CPI-W is based on a market basket of goods and services, categorized into eight major groups: Food and Beverages, Housing, Apparel, Transportation, Medical Care, Recreation, Education and Communication, and Other Goods and Services.
The Social Security benefits you could apply for
Social Security offers a range of benefits and programs designed to provide financial security for individuals and families. One of the most well-known programs is retirement benefits, which provide a regular source of income to eligible retirees.
These benefits are based on your work history and earnings, and you can choose to start receiving them as early as age 62, though waiting until full retirement age (typically between 65 and 67, depending on your birth year) can result in higher monthly payments.
Another program of Social Security is disability benefits. If you become disabled and are unable to work, you may qualify for Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) depending on your work history and financial situation. These programs provide vital support to individuals and families facing disabilities.
Additionally, Social Security offers survivor benefits to the families of deceased workers, ensuring that spouses and dependent children have financial protection in the event of a tragic loss. Overall, Social Security plays a vital role in the financial well-being of millions of Americans, offering a safety net for retirement, disability, and survivors’ needs. You can get further information in the official SSA website.