The next Social Security payment bump is about to become clear
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The Consumer Price Index is due out Thursday at 8:30am EST. While it's a number that always matters for understanding inflation trends, this one has extra significance.
Why it matters: September's CPI is the final data point needed to calculate the cost of living adjustment that 71 million recipients of Social Security retirement and disability benefits see for 2024. It looks likely that the COLA will be in the low 3% range.
- The AARP projected it at around 3% in August, the Senior Citizens League projected it at 3.2% last month and back-of-envelope calculations by Axios suggest it could come in at 3.3% if forecasters' CPI projections prove accurate.
- The average retirement beneficiary would see an extra $55 to $60 a month, depending on where the number lands.
How it works: The COLA is based on the change in Q3 CPI for urban wage and clerical workers compared with a year earlier. We already have the July and August numbers, so the September number out tomorrow is the final one needed.
- Besides retirement and disability benefits, this inflation adjustment is also used to calculate the wage cutoff above which Americans do not owe Social Security tax. It is currently $160,200 and would reach $165,300 if the adjustment turns out to be 3.2%.
Between the lines: With the exceptionally high adjustments of 2021 (5.9%) and 2022 (8.7%) in the rearview mirror, Social Security recipients won't be seeing the surge in nominal income of the recent past.
- That could also put a damper on consumer spending in early 2024. But it also reflects a more benign inflation environment.
Yes, but: Inflation hasn't fully subsided. The Producer Price Index rose by 0.5% in September, the Labor Department said this morning. That was significantly driven by higher energy prices.
- Core wholesale prices, excluding food and energy, were up a more modest 0.2% in September, or 2.2% over the past year.
- Analysts expect the CPI number tomorrow to show a 0.3% rise in both headline and core in September, which would translate to 3.6% overall inflation and 4.1% core inflation over the past 12 months.
