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Social Security recipients are on track to receive a smaller-than-expected cost-of-living adjustment (COLA) next year after inflation moderated more than expected in May.
Mary Johnson, a retired Social Security and Medicare analyst, estimated the adjustment could be about 3%, based on May inflation datawhich showed that the consumer price index was unchanged from the previous month and increased by 3.3% from the same period last year.
Both figures are lower than expected, suggesting that high inflation is loosening its grip on the US economy.
INFLATION GROWS 3.3% IN MAY, LESS THAN EXPECTED
The annual change in Social Security is calculated based on the Consumer Price Index for Urban Earners and Clerical Workers, or CPI-W, from July, August and September. The CPI-W also posted a 3.3% increase in May.
In this photo illustration, a Social Security card sits next to checks from the U.S. Treasury in October. 14, 2021, in Washington, DC (Kevin Dietsch/Getty Images/Getty Images)
If Social Security recipients see a 3% increase in their monthly checks next year, that would mark a big drop from 2023, when recipients saw a 8.7% crash and from 2024, when benefits increased by 3.2%.
However, it remains higher than the average growth of 2.6% recorded over the past two decades.
An increase of that rate would increase the average retiree’s benefit of $1,907 by about $57.21 a month.
US OWNERSHIP COSTS UP 26% SINCE BEGINNING OF 2020
Even with the cost of living rising last year, many retirees say they are struggling to keep up with high inflation. Johnson suggested that the CPI-W may actually be an inaccurate way to measure where older Americans actually spend their money.
That’s because the CPI-W assumes that retirees spend about two-thirds of their income on housing, food, and medical costs. In reality, they spend about three-quarters of their income on these needs.
Customers shop at a supermarket in Foster City, California, in September. 13, 2023. (Photo by Li Jianguo/Xinhua via Getty Images/Getty Images)
“This disparity suggests that my estimate of the COLA, which is based on the CPI-W, may underestimate real headline inflation by more than 10%,” Johnson said.
This year’s benefit increase of 3.2% exceeded the actual rate of inflation in March, April and May.
WHAT HIGH FOREIGN COSTS MEAN FOR YOU AND YOUR MONEY
of Social Security Administration will publish the final percentage adjustment in mid-October.
A shopper scans coupons at a grocery store in Washington, DC, on May 23, 2024. (Tom Williams/CQ-Roll Call, Inc via Getty Images/Getty Images)
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Inflation has created severe financial pressures on most American families, who are forced to pay more for everyday necessities like food and rent. The burden is borne disproportionately by low-income Americans, whose already stretched wages are greatly affected by price fluctuations.
The typical American household had to pay $227 more per month in March to buy the same goods and services it did a year ago because of inflation still highaccording to calculations by Moody’s Analytics chief economist Mark Zandi, shared with FOX Business.
Americans are paying an average of $784 more each month compared to the same time two years ago and $1,069 more than three years ago, before the inflation crisis began.
The analysis suggests that while inflation has fallen from mid-2022 peaks, many households have yet to see material relief.
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