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Social Security recipients will get a smaller increase in benefits as inflation cools

High inflation has been particularly tough for people who rely on Social Security for their income.
Brandon Bell
Getty Images
High inflation has been particularly tough for people who rely on Social Security for their income.

Inflation held steady last month — and for retirees who depend on Social Security, the pace of price hikes means a more modest, though still welcome, cost-of-living increase next year.

Consumer prices in September were up 3.7% from a year ago, on par with the previous month.

Prices rose 0.4% between August and September, compared to a 0.6% jump between July and August. Rising rents and gasoline prices during September were partially offset by the falling price of used cars and trucks.

Inflation has eased in recent months, providing some relief for consumers as well as the Federal Reserve, which has been raising interest rates aggressively since last year.

Cooling inflation matters to Social Security beneficiaries in another way. Their annual cost-of-living adjustment, or COLA, is based on the average annual inflation rate for July, August and September — though it's calculated using a slightly different price index.

That means Social Security beneficiaries are set to receive a benefit increase of 3.2% next year, smaller than the 8.7% bump they got this year, which was the largest in decades.

The average retiree will receive about $55 more each month, beginning in January — compared to this year's increase which averaged $114 a month.

Smaller Social Security increases are still welcome

"Every little bit helps," says Carol Egner, a retired administrator who lives in Ketchikan, Alaska. She says her Social Security check barely covers necessities such as insurance, gas and heat.

"You just have to cut back on something," she says. "There's nothing left over for anything else."

Regina Wurst is also grateful for the cost of living adjustment, even though it's smaller than this year's.

"Any increase is very helpful," she says. "I'm 72 and I live in California, so the cost of living is quite high."

Most of Wurst's monthly Social Security check goes for rent on the house she shares with nine other family members. She's also raising two of her grandchildren.

"I was just today wondering how am I going to buy school clothes for my 10-year-old granddaughter," Wurst says. "She's really asking for more clothes. She wears the same thing every day."

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Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.