Inflation has been cooling nicely since peaking in mid-2022. While that's a good thing for consumers, including retirees on fixed incomes, it could also set the stage for a much lower Social Security cost-of-living adjustment, or COLA, in 2024.

COLAs are pegged directly to changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Surging inflation in 2022 led to a generous 8.7% Social Security COLA in 2023. But based on more recent inflation readings, next year's COLA is looking to be somewhere in the ballpark of 3%.

We won't know what 2024's COLA will be until October. That's because that raise will hinge specifically on what the CPI-W does during the third quarter of the year. But unless inflation soars unexpectedly in August and September -- an unlikely event in light of the Federal Reserve's most recent interest-rate hike -- seniors on Social Security should expect their benefits to rise only modestly once the new year begins.

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Source Fool.com