COLA Watch 2024–Likely Nowhere Near 2023 - AMAC; The Motley Fool
Inflation is easing, and that’s a good thing for the economy in general. Unfortunately for seniors, though, that downward trend brings with it a similar trajectory in cost-of-living adjustments (COLA). In fact, current projections are that the COLA for next year, when calculated in October of this year, will likely be less than half of 2023’s 8.7% adjustment, potentially as low as 3%. For seniors–the population cohort that according to The Senior Citizens League has systematically lost an estimated 36% of its purchasing power since the beginning of this century–this will be a serious blow.
For background, note that each year’s COLA calculation results from comparing the third quarter average Consumer Price Index[1] each year to the same average from the preceding year. The result of dividing the current year’s average by the previous year’s average produces the COLA for the following year. For 2023’s adjustment, the 2022 third-quarter average was 291.901 and the comparable figure for 2021 was 268.421, producing the 8.7% benefit addition.
Here’s where the bad news surfaces…the monthly CPI-W figure has been dropping steadily from its last October peak, the result of efforts to bring the rate of inflation down from its 40+year high. Assuming the downward trend—or even a leveling off—continues through the third quarter, the 2024 COLA calculation factors look to be substantially less. In fact, an article by The Motley Fool’s Bram Berkowitz, posted on their website, notes that the CPI-W figure used in the calculation dropped from about +6.25% in January to about +4.6% in April.
Read the Bram Berkowitz artlcle here, and stay tuned to this site for updates as the calendar moves to the point of COLA calculaton in October.
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[1] Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W)