US retirees will get 3.2% social security boost next year, smallest gain since 2021

Monthly checks for the more than 71 million people receiving retirement or disability benefits in the U.S. will get a 3.2% increase next year, the smallest gain since 2021, reflecting a significant cooling in the rate of inflation.

The cost-of-living adjustment, known as COLA, will apply to Social Security benefits starting in January and Supplemental Security Income benefits beginning on December 29, the Social Security Administration said Thursday.

The annual COLA, designed to ensure that the purchasing power of Social Security beneficiaries isn't eroded by inflation, is calculated from the consumer price index. The slowdown in CPI from its decades-high last year means a much smaller boost for seniors in 2024 than in the past two years.

Read more:  SECURE 2.0 brings retirement plan opportunities — and challenges

Last year's COLA was the largest in more than three decades, and it contributed to a surprise jump in consumer spending at the beginning of 2023.

"Social Security and SSI benefits will increase in 2024, and this will help millions of people keep up with expenses," said Kilolo Kijakazi, Acting Commissioner of Social Security.

The Social Security Administration bases its annual COLA calculation on the percentage change in the CPI for urban wage earners and clerical workers in the third quarter compared with a year earlier. Those workers cover about 30% of the population, according to the Bureau of Labor Statistics.

Read more:  Why student debt and Social Security are on a collision course

Based on the annual adjustment, the maximum amount of earnings subject to the Social Security tax will also increase next year to $168,600 from $160,200.

Overall, U.S. consumer prices advanced at a brisk pace for a second month, reinforcing the Federal Reserve's intent to keep interest rates high and bring down inflation.