Social Security beneficiaries may see a relatively modest cost-of-living adjustment (COLA) in 2024, as inflation appears to be subsiding.
However, with two months left before the official announcement of the COLA for the upcoming year, there’s an unexpected factor that could potentially push the adjustment higher: hurricanes.
The Senior Citizens League, a nonpartisan senior group, estimates that the Social Security COLA for 2024 might be around 3%, based on the latest government consumer price index (CPI) data.
In July, the consumer price index increased by 3.2% compared to the previous year. On the other hand, the CPI-W (Consumer Price Index for Urban Wage Earners and Clerical Workers), the subset of the index used by the Social Security Administration to calculate the annual COLA, showed a 2.6% increase over the past 12 months.
One significant reason for the disparity between these indexes is the greater emphasis on oil and gas prices in the CPI-W, according to Mary Johnson, a Social Security and Medicare policy analyst at The Senior Citizens League.
The forthcoming CPI data for September and October, which will influence the final benefit adjustment for 2024, will depend heavily on changes in gasoline prices. If gas prices rise considerably, the COLA estimate is likely to increase, whereas a drop in gas and oil prices could lead to a lower COLA estimate.
Hurricanes could play a pivotal role in influencing these COLA figures. This year’s hurricane season, which runs from June 1 to November 30, has a 60% chance of being “above normal” due to unusually high ocean temperatures, according to the National Oceanic and Atmospheric Administration (NOAA).
Hurricanes, especially those impacting the Gulf Coast and nearby refineries, can result in temporary spikes in gas prices. However, currently, the combination of lower oil prices and steady demand has kept gasoline prices relatively stable, with the national average at $3.87 per gallon as of Friday, according to AAA.
Even if the Social Security COLA exceeds the estimated 3% for 2024, it is unlikely to come close to the record 8.7% increase seen this year.
This may pose challenges for individuals aged 62 and older who are still grappling with the ongoing high costs associated with inflation.
Mary Johnson emphasized that a significant portion of seniors’ budgets is allocated to housing, food, and healthcare expenses, which have been affected by inflation.
Some of these costs, particularly those related to housing, Medicare, and healthcare, tend not to decrease significantly over time.