Unless you’ve been living in a cave or haven’t visited a grocery store since the good ole days of 2019, you’re painfully aware that inflation has been running pretty high. One little piece of good news wrapped up in this is that the more than 66 million recipients of Social Security benefits will be getting another raise next year. The Social Security Administration (SSA) just announced that benefits will increase by 3.2% for 2024. But do you know how Social Security cost of living adjustments (COLA) are calculated?
Every October, SSA compares the average rate of inflation from the third quarter of the prior year (or the last year a COLA was applied if not in the previous year) to the third quarter of the current year. If there is an increase, then beneficiaries receive a raise. To determine the rate of inflation, SSA uses a measure called the Consumer Price Index for Urban Wage Earners and Clerical Workers or CPI-W. CPI-W is compiled by the Bureau of Labor Statistics and is intended as a gauge of the costs of a basket of goods and services used by a typical household. CPI-W contains about 200 common consumer products arranged into eight categories:
· Food and beverages
· Medical care
· Education and communication
· Other goods and services
In July of 2022, CPI-W was 292.219, in August of 2022, CPI-W was 291.629 and in September it was 291.854. All totaled up, these come to 875.702. Divide by three and we arrive at an average CPI-W for the third quarter of 2022 of 291.901. The average for the third quarter of 2023 was 301.236, so the increase was 3.2%. Hence your 2024 COLA increase. Not too complicated, right? Now you know more about Social Security’s COLA than you ever wanted and are certain to be the life of any party. Enjoy!
This material was developed and prepared by a third party for use by your Registered Representative. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. The content is developed from sources believed to be providing accurate information.