THE DOWNSIDE TO DECLINING INFLATION

After two years of big cost-of-living increases, retirees will likely receive a more modest Social Security raise in 2024.

- SANDRA BLOCK

THE decline in the inflation rate is welcome news for anyone who needs to pay for groceries, gas or rent. But if you're retired, you may be disappointed to learn how this development could affect your Social Security benefits.

The Kiplinger Letter forecasts that Social Security beneficiaries will receive a cost-of-living increase of 3% for 2024, down from 8.7% in 2023 and 5.9% in 2022. A 3% cost-of-living adjustment will increase the average monthly benefit for retirees to about $1,892, up from $1,837.

The forecast is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which rose at a 12-month rate of 3% in June, down from 4% in May and 4.9% in April. The 2024 cost-of-living adjustment is based on the CPI-W in the third quarter of 2023, so if inflation rises before October, the COLA will be adjusted upward.

While the forecast gives retirees a preview of what could happen to their benefits next year, they won't get the total picture until this fall, when the Centers for Medicare and Medicaid Services (CMS) announces Medicare Part B premiums for 2024. Most retirees have their Part B premiums automatically deducted from their Social Security payments, so a big increase in premiums can significantly dampen any cost-of-living increase. That tends to hit people with the lowest Social Security benefits the hardest, says Mary Johnson, policy analyst for the Senior Citizens League.