Last month, the Social Security Administration announced a 3.2% cost-of-living adjustment (COLA) to both Social Security and Supplemental Security Income (SSI) benefits. The increase will take effect in January 2024.

Another change pertains to the maximum amount of earnings subject to the Social Security tax, which will increase from $160,200 to $168,600 in 2024. The earnings limit for workers who are younger than the full retirement age will increase from $21,240 to $22,320.

For this month’s Illustrating Trends, we look at the 20-year trend in COLAs. Next year’s increase pales in comparison to the 8.7% adjustment announced in 2022. However, it is the third-highest COLA since the global financial crisis ended. It also ranks as the seventh-highest increase over the last 20 years.

The average COLA over the last 20 years is 2.6%. The median increase is 2.2%.

While retirees will surely welcome the rise in benefits, the above-average increase reflects the ongoing elevated levels of inflation. Annual COLAs were below 2.0% six times between 2009 and 2020. No adjustment was announced in 2009, 2010 and 2015. In contrast, the most recent increases were 5.9% (announced in 2021), 8.7% and this year’s 3.2%.

The annual adjustments are determined by the percentage increase in the consumer price index for urban wage earners and clerical workers (CPI-W) from the third quarter of the prior year to the third quarter of the current year. No COLA is made if the change in inflation is flat over that time period.

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