A cost-of-living adjustment, often known as a COLA, is given to seniors and millions of other Social Security claimants each year in an effort to keep their monthly benefits in line with inflation.
The Senior Citizens League estimates that the cost-of-living adjustment (COLA) for the upcoming year maybe 3% or even lower based on recent inflationary trends.
According to Mary Johnson, the Social Security and Medicare policy analyst at the Senior Citizens League, the estimate is based on the 12-month average rate for the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), a basket of goods and services typically purchased by workers.
She pointed out that even when inflation rose month over month, as it did in January, the 12-month average has been falling.
Although still well above the Federal Reserve’s target rate of 2% yearly, price rises are currently slowing down, even if inflation trends are subject to alter.
The Social Security Administration claims that it bases its COLA on the CPI-percentage W’s growth from the previous year’s third quarter.
According to the government, there won’t be a COLA adjustment if the difference between the two numbers doesn’t rise.
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COLA smallest adjustment
Prior to the price spike in 2021 and 2022 that has stretched household budgets and reduced the purchasing power of Social Security claimants, a 3% COLA would represent the weakest adjustment since 2020.
A COLA of 8.7% was given to Social Security recipients in 2023, the highest in four decades, but some seniors claim that wasn’t enough to keep them ahead of inflation.
The rate of inflation outside the United States increased by 6% annually in February, slowing from the previous month but remaining stubbornly high.
The most recent official statistics show that the CPI-W increased at an annual pace of 5.8% last month.
According to projections compiled by financial data company FactSet, economists anticipate that inflation will run at a rate of 4% in 2023.
Many predict that inflation will decline during the year, with Goldman Sachs predicting that in December it will reach an annual rate of 3.7%.
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