The anticipated cost of living adjustment (COLA) for senior citizens is poised to witness a decline of nearly 6 percent in contrast to the ongoing rate, primarily due to a decrease in inflation. This development, as highlighted by policy analysts, could potentially impose further financial constraints on elderly Americans who are already managing their finances tightly.
Forecasts suggest that the Social Security Administration (SSA) will unveil the official COLA rate for 2024 on October 12. Analysts predict this rate to be around 3 percent, calculated based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) – the yardstick utilized for determining the COLA. It’s noteworthy that the present rate stands at 8.7 percent, marking the highest COLA received by beneficiaries of Social Security in over four decades.
Impact of a Potential 3% COLA Increase on Seniors
Should this 3 percent COLA materialize, it would augment the average monthly benefits for seniors – currently at $1,789 – by an additional $53.70. Despite a downturn in the inflation rate since the start of this year, the average monthly rate has experienced a slight uptick, which substantiates the viability of the projected 3 percent increment.
The mid-July study unveiled that a significant 79 percent of retired respondents indicated escalated prices in categories like housing, food, and prescription medications compared to a year ago. Elderly individuals typically allocate approximately half of their income towards housing-related expenses, encompassing property maintenance, repairs, and home insurance. Despite inflation’s purported moderation, these costs remain elevated.
Groceries rank as another substantial expenditure. The cost variation among goods, such as wheat, exemplifies this disparity, partly attributed to geopolitical tensions such as the conflict in Ukraine.
Medical and prescription expenses claim a spot within the top three expenditures. Notably, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) fails to encompass individuals aged 62 and above, excluding costs like Medicare Part B premiums.
A more recent survey conducted this week indicated that 45 percent of 2,050 respondents relied heavily, to the extent of 90 percent or more, on Social Security for their income. Inflation’s broader impact is arguably more pronounced among the non-retired workforce due to relatively modest salary increments. Additionally, unexpected variables, including natural disasters like the ongoing wildfires wreaking havoc in Maui, can also disrupt seniors’ financial stability.
Gasoline and petroleum prices wield significant influence within the CPI-W. Fluctuations in the cost of these petroleum products directly impact COLA estimates, as their significance can promptly propel the estimates upward or downward due to the weight they carry.