Social Security check may be bigger next year. Here's why
Social Security recipients are on track to receive a cost-of-living adjustment (COLA) next year that is bigger than previously expected as inflations remains uncomfortably high.
Mary Johnson, a retired Social Security and Medicare analyst, estimated the adjustment could be about 3.2%, based on April inflation data, which showed the consumer price index climbed 0.3% from the previous month and is up 3.4% from the same time last year.
The annual Social Security change is calculated based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, or the CPI-W, from July, August and September. The CPI-W also posted a 3.4% increase in April.
Should Social Security beneficiaries see a 3.2% increase in their monthly checks next year, it would mark a steep decline from 2023, when recipients saw an 8.7% bump. However, it remains higher than the 2.6% average increase recorded over the past two decades.
AMERICANS ARE CARRYING A RECORD AMOUNT OF HOUSEHOLD DEBT
An increase of that magnitude would raise the average retirement benefit of $1,907 by about $61 per month.
The annual Social Security change is calculated based on the Consumer Price Index for Urban Wage Earners and Clerical Workers from July, August and September. (Credit: Kevin Dietsch/Getty Images / Getty Images)
Even with last year's cost-of-living increase, many retirees say they are struggling to keep up with high inflation, according to Johnson.
This year's 3.2% benefit increase exceeded the actual rate of inflation in March and April.
WHY ARE GROCERIES STILL SO EXPENSIVE?
"The higher inflation indicates that consumers are still experiencing an erosion in buying power," Johnson said.
The Social Security Administration will release the final adjustment percentage in mid-October.
Inflation has created severe financial pressures for most U.S. households, which are forced to pay more for everyday necessities like food and rent. The burden is disproportionately borne by low-income Americans, whose already-stretched paychecks are heavily impacted by price fluctuations.
Housing and gasoline costs were once again the biggest drivers of inflation last month, accounting for more than 70% of the total monthly increase, according to the report.
Rent costs rose 0.4% for the month and are up 5.6% from the same time last year. Rising rents are concerning because higher housing costs most directly and acutely affect household budgets. Gasoline prices, meanwhile, jumped 2.8% over the course of April. They are up 1.2% when compared with the same time last year.
Consumers received some reprieve on the cost of groceries, which fell 0.2% in April from the previous month. However, grocery costs remain up 1.1% from the same time last year and up more than 21% when compared with January 2021, shortly before the inflation crisis began.