The forecast for next year’s Social Security increase stayed flat at 3% on Thursday even after the government said inflation ticked up in July for the first time since June 2022. 

Annual inflation last month edged up to 3.2%, from 3% in June but off from a 40-year high of 9.1% in June 2022. Without the volatile food and energy sectors, the so-called “core” inflation rate rose 4.7%, slightly lower than in June. 

Energy declined 12.5% over the year while food rose 4.9%, compared with a 16.7% drop and 5.7% increase, respectively, in June. Shelter, which includes rents, jumped 7.7% over the last 12 months but it was still softer than June’s 7.8% gain. 

Despite the uptick in inflation last month, the trend remains lower, which means Social Security recipients will see a lower cost-of-living adjustment (COLA) of 3% next year, according to a forecast from The Senior Citizens League, a nonprofit seniors group.  That’s less than half of the four-decade high 8.7% COLA in 2023 and the same as last month’s estimate for a 3% increase for 2024. 

Lower inflation is welcomed, “but most older Americans are reporting that persistently high prices still affect their household budgets,” said Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League.   

Protect your assets: Best high-yield savings accounts of 2023

Seniors are still reeling from 2021 and 2022 inflation  

Annual COLAs are meant to ensure Social Security beneficiaries’ purchasing power isn't eroded by inflation.  However, COLA hasn’t kept pace, and seniors were the only group that saw its share of poverty increase between 2020 and 2021, the Census Bureau said.    

Even though inflation this year has been running below the 8.7% beneficiaries received, they haven't been able to recoup the losses they incurred in the past two years when inflation reached a 40-year high, Johnson said.  

“Inflation was so severe in 2021 and 2022 that the average Social Security benefit fell behind by $1,054, leaving 53% of retirees doubting they will recover because household costs rose more than the dollar amount of their COLAs,” she said. 

More seniors also are paying taxes on Social Security 

Taxes, not just inflation, are eating into Social Security benefits, too.  

In a survey of 1,759 retirees by The Senior Citizens League in mid-July, more than one in five Social Security beneficiaries (23%) said they paid tax on a portion of their benefits for the first time this past tax season (April 2022). The tax return for 2022 reflected a 5.9% COLA increase in Social Security benefits.  

“We expect the number who pay tax on a portion of their Social Security benefits to jump even more as next year’s tax season reflects the 8.7% COLA increase in 2023,” Johnson said. 

How are seniors coping? 

With 79% of respondents saying essential items were pricier than a year ago, most are putting off medical care to pay for daily living expenses, the survey said. 

Nearly 2 out of 3 have postponed dental care including major services such as bridges, dentures, and implants to cope, while 43% said they’ve delayed optical exams or getting prescription eyeglasses and one-third have postponed getting medical care or filling prescriptions due to deductibles, out-of-pocket costs, and unexpected bills. 

Searching for the best:Senior living: These states offer the best quality of life for retired and elderly Americans

How is COLA calculated?  

Social Security Administration (SSA) bases its COLA each year on average annual increases in the consumer price index for urban wage earners and clerical workers, or CPI-W, from July through September. CPI-W largely reflects the broad CPI that the Labor Department releases each month but differs slightly. Last month, while the CPI rose 3.2%, the CPI-W increased 2.6%.  

The Seniors Citizens League uses the most recent inflation data to keep a running projection of what COLA might be next year. July is particularly important because it kicks off the first of three months SSA officially uses to calculate 2024’s COLA. 

How many Americans qualify for the COLA increase?  

About 70 million Americans receive benefits from programs administered by SSA, with retired workers and their dependents accounting for 76.9% of benefits paid in 2022.   

Nearly 9 out of 10 people aged 65 and older received a Social Security benefit as of Dec. 31. Among them, 12% of men and 15% of women rely on Social Security for 90% or more of their income.  

How much more money would Americans get each month with a 3% COLA?

In June, the average monthly check for Social Security beneficiaries was $1,701.62, according to SSA. A 3% COLA would mean about an extra $51 each month. 

When is Social Security COLA announced?   

The next COLA is scheduled to be announced in October and be effective starting January 2024.    

Medora Lee is a money, markets, and personal finance reporter at USA TODAY. You can reach her at[email protected] and subscribe to our free Daily Money newsletter for personal finance tips and business news every Monday.