At the start of the third quarter 2023, the outlook for the cost-of-living-adjustment (COLA) for Social Security beneficiaries is for a modest increase in January 2024. Based on the CPI-W for July only, the year-over-year comparison with the CPI-W average for July-September 2022 is for an increase of 2.7 percent. This would be the lowest since 1.3 percent in 2020.
After the hefty 8.7 percent increase in 2022 that went into effect in January 2023, that may feel like a letdown for beneficiaries. However, there are two more CPI reports to come that could alter the outlook for the COLA – in either direction. Nonetheless, unless there is an outsized change in the underlying trend for consumer prices, next year’s COLA is likely to be somewhere between 2.5 to 3.0 percent.
The average size of the COLA is 3.8 percent, although that has varied widely since the first COLA in 1975. There are years (2010, 2011, and 2016) in which the year-over-year percent change for the third quarter CPI-W was a negative, and therefore no COLA was given. Then there are years (1980 and 1981) when the pace of inflation was so high that double-digit increases were given.
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