New YorkCNN —  Social Security benefits pump a large chunk of change into the US economy – with about $1.4 trillion going to more than 67 million Americans last year alone.

The program, equivalent to 5% of the country’s gross domestic product, provides a cash infusion that helps keep the economy afloat – recipients purchase goods and services with their benefits resulting in more revenue for businesses and jobs for workers.

That’s why it’s a big deal when Social Security recipients receive their annual cost-of-living adjustment.

Starting in January they’ll see a 3.2% increase in their Social Security checks, that’s a much smaller increase than the inflation-fueled boosts of the past two years, the Social Security Administration announced last week.

Retirees’ monthly payments will rise by $59 to an estimated average of $1,907. The lower adjustment reflects the fact that inflation has moderated this year. Recipients had received increases of 8.7% for 2023 and 5.9% for last year, which were the largest since the early 1980s.

Before the Bell spoke with David Certner, legislative counsel and policy director at AARP to discuss how that will impact the economy.

(This interview has been edited for length and clarity.)

Before the Bell: How does the Social Security Administration calculate these changes?

David Certner: The Social Security Cost-of-Living Adjustment (COLA) is based on the Consumer Price Index for urban wage earners. They look at the change in the year-over-year for the third quarter, which just ended in September, to determine the adjustment. So they look at those numbers for July, August and September to come up with the 3.2% cost of living adjustment.

Before the Bell: The last two annual adjustments have been really large. What does the drop off in 2024 mean?

so that’s a very bad thing. The COLA helps offset that but it never helps you get ahead.

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