During the past decade, Social Security benefit COLAs in the United States have varied quite widely, mirroring the ups and downs of inflation. These yearly COLAs are necessary because they provide assurance that benefits remain comparable to the increasing cost of living, most significant to beneficiaries who are retirees or disabled and whose sole source of income is Social Security.
Year-by-year COLA percentages (2015–2024)
COLA raises between 2015 and 2024 varied significantly. In 2015, the recipients experienced a 1.7% raise. Interestingly enough, no raise was experienced in 2016 since inflation as calculated by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) dipped slightly. A minuscule 0.3% adjustment was instituted in 2017. The adjustment dipped to more typical levels in 2018 with a 2.0% increase and increased to 2.8% in 2019. Beneficiaries were given a 1.6% increment in 2020 at the outbreak of the COVID-19 pandemic.
The years 2021-2024 experienced more volatility. In 2021, the COLA was 1.3%, then a large jump to 5.9% in 2022 when inflation rose sharply with supply-chain issues and rises in the price of energy and commodities. The 2023 COLA was even more dramatic, at an overall 8.7% boost—the largest boost since the early 1980s—mirrored the persistent high inflation. In 2024, as inflation began to taper off, the COLA dropped to 3.2%, nearer to historical norms.
Trends and drivers
Early in the decade, 2015-2017, COLA increases were tiny or zero, merely because inflation was minimal or even below zero in those respective years. The 2016 zero COLA was particularly notable because it meant no increase for Social Security recipients, highlighting the vulnerability of fixed incomes when inflation decreases. Starting in 2018, annual adjustments moved to more familiar percentages, as inflation rose to more moderate levels.
The particularly sharp increases of 2022 and 2023 result from an inflation spike fueled by pandemic-related economic disruptions, including supply chain problems and surges in food, energy, and housing prices. The two years’ adjustments resulted in substantial increases for beneficiaries but also reinforced the economic upheaval during this period.
By 2024, inflation pressures had started to recede, ushering in a more moderate hike in COLA, indicating the return of more stable patterns witnessed in previous decades.
Impact on beneficiaries
COLAs are a crucial protection of Social Security recipients’ purchasing power. Even small increases enable them to keep pace with rising expenses, particularly healthcare and housing, that generally outpace aggregate inflation. The 2016 zero COLA gave a clear illustration of the issue as inflation recedes or even declines, with fixed-income workers receiving no assistance.
The record increases in 2022 and 2023 were unusual but necessary steps to combat runaway inflation so beneficiaries could keep pace on the standard of living when faced with extreme rises in costs of ordinary living. Aside from changes in benefits, COLAs also affect other Social Security environments, such as the maximum taxable earnings amount and income levels for current workers receiving benefits, making the change significant more than just monthly benefit worth.
Looking ahead
Because inflation rates equalize, future COLAs are expected to move toward average historic rates of around 2% to 3%. Nevertheless, beneficiaries need to remain vigilant each October, when the Social Security Administration announces the yearly COLA, to bracing for potential changes in benefits.
By knowing these trends, Social Security beneficiaries will be able to better anticipate and prepare for alterations in their income, which will help them adapt to budgets in a forever changing economic environment.
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