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COLA Watch: We’re in the Homestretch for a 2024 Figure
We’re now in the third quarter of the year, and the projections for 2024’s Social Security cost-of-living adjustment are starting to come into focus. Remember, of course, 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.
This year, the monthly CPI-W figure has been fluctuating since peaking in the third quarter of last year. That peak, of course, is what led to the extraordinary 8.7% adjustment in January of this year. The drop from last year’s increases in monthly averages, largely the result of efforts to bring the rate of inflation down from its 40+year high, has brought lower monthly increases, and, recently, various news accounts of an expected 2024 COLA approaching 3% have popped up. The resulting calculation, though, will not be made until mid-October, when the CPI-W figures for July through September are in the books.
In the meantime, it’s fun to speculate on what the final number will be, and it does look like something in the 2.5% to 3% range is a good bet. Using the CPI-W averages for the first half of 2023 as a comparison base, for example, yields a projection of 1.6%, but using the second quarter 2023 averages bumps that up to 2.3%. And using just last month’s index suggests 2.6%, so you can see the upward trend.
OK…that’s enough fun with numbers. We’ll just need to wait for the final calculation in October!
[1] Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W)