COLA Increase 2024: Calculating Annual Adjustments

COLA Increase 2024: The primary purpose of the Cost of Living Adjustment (COLA) is to protect the purchasing power of Social Security and Supplemental Security Income (SSI) benefits from the effects of inflation.

This adjustment is based on the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) between the third quarter of the previous year for which a COLA was calculated and the third quarter of the current year.

In cases where there is no increase, there is no COLA.

The CPI-W, a metric calculated by the Bureau of Labour Statistics within the U.S. Department of Labour, is the official metric required by law for the Social Security Administration to calculate COLAs.

According to the most recent consumer price data released, the projected Social Security cost-of-living adjustment may be marginally higher than the previous month’s estimate.

The Senior Citizens League (TSCL) now expects the COLA for 2024 to reach 3%.

The index used to determine the COLA, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), increased by only 2.3% year-over-year.

However, the average inflation rate over the past twelve months has increased marginally, influencing the COLA projection.

Based on June data, this estimate has increased from 2.7% last month to 3% this month.

Which months are used to determine the COLA?

Before the COLA announcement in October, there are still a few months of data to be compiled, so this estimate is subject to change.

The COLA is calculated based on the CPI-W’s measurement of the third-quarter inflation rate, which includes July, August, and September.

The average inflation rate for these three months is then compared to the average inflation rate for the same period one year ago.

The percentage difference between the two averages determines the amount of the COLA adjustment that will be applied to the January 2024 payments.