Annual cost-of-living adjustments (COLAs) serve as a safeguard against inflation for Social Security benefits. However, the 3.2% COLA in 2024 has left some retired workers feeling dissatisfied, particularly in comparison to the substantial 8.7% boost in 2023 and the 5.9% COLA in 2022.
The recent memory of significant inflation further contributes to this sentiment among many Americans.
Nevertheless, gaining perspective on the average Social Security COLA over the past decade might offer retired workers a more nuanced understanding of the current benefit increase.
This exploration aims to shed light on why a larger COLA in 2024 could have presented challenges despite initial dissatisfaction.
Average Social Security COLA Over a Decade
Since 1975, Social Security benefits have undergone annual cost-of-living adjustments (COLAs) designed to counteract the effects of inflation.
These adjustments are determined based on changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), a monthly gauge of price fluctuations reflecting the spending habits of workers.
To elucidate, the third-quarter CPI-W of the current year (July through September) is divided by the third-quarter CPI-W of the preceding year.
The resulting percentage increase (if any) becomes the COLA for the subsequent year. For example, with the third-quarter CPI-W experiencing a 3.2% rise in 2023, Social Security benefits received a corresponding 3.2% COLA in 2024.
The provided table delineates the Social Security COLA for each of the last 10 years, culminating in the 10-year average COLA at the conclusion.
The data, sourced from the Social Security Administration, underscores the historical pattern of COLA adjustments:
Below is the Social Security Cost-of-Living Adjustment (COLA) for each year over the past decade, along with the 10-year average:
- 2015: 1.7%
- 2016: 0%
- 2017: 0.3%
- 2018: 2%
- 2019: 2.8%
- 2020: 1.6%
- 2021: 1.3%
- 2022: 5.9%
- 2023: 8.7%
- 2024: 3.2%
- Average: 2.8%
This tabulated data illustrates the annual COLA percentages and provides insight into the 10-year average COLA.
The average Social Security COLA over the last decade stands at 2.8%, rounded up from 2.75%. Thus, the 3.2% COLA in 2024 surpasses the 10-year average.
While not explicitly shown in the table, the average Social Security COLA over the last two decades was 2.6%, enhancing the appeal of the 2024 COLA when compared to the 20-year average.
