With inflation nearly 40 years old, Social Security could see a historic boost next year to help seniors keep up. The most recent estimate for a cost of living (COLA) adjustment in 2023 is 9.6 percent, said Mary Johnson, social security and health care policy analyst for senior advocacy group the Senior Citizens League (SCL).
The July Consumer Price Index (CPI) report shows that inflation has risen by 8.5 percent in the past 12 months, making it more difficult for people on fixed incomes, such as those on Social Security benefits, to make ends meet. knots.
The 2023 COLA will be based on data from the third quarter of the consumer price index for urban wage earners and white-collar workers, or CPI-W. Johnson says the announcement is expected around October 13, following the release of the September CPI report. If inflation “runs high” or higher than average, Johnson predicts the COLA could rise to 10.1 percent by 2023. Should it be lower than the recent figures, 9.3 percent is more likely.
A 9.6 percent adjustment would increase the average monthly retirement benefit of $1,656 by $158.98, Johnson says.
The previous COLA came in at 5.9 percent and 9.6 percent this year would be huge in terms of COLA rates in the recent past. The table below shows the past 10 years of tariff increases. As you can see, even the jump in 2021 to 5.9 percent was well above the 0-2.8 percent range over the past decade.
|Year||COLA rate (percent)|
Source: Social Security Administration
COLA may not be enough
The CPI-W is the measure by which monthly increases in Social Security benefits are determined, but the Senior League has long argued that the index is not representative of the way seniors live.
An oft-cited complaint about the CPI-W is the weight it gives to things like gasoline — something that city workers and white-collar workers may have to commute to work more daily than retired seniors. The SCL says this figure underestimates inflation experienced by Social Security recipients because it doesn’t give enough weight to seniors’ spending, such as health care or housing.
The competition calls for the use of R-CPI-E, or the consumer price index for the elderly, instead of the CPI-W. The R-CPI-E is specifically based on the spending pattern of the elderly. The group estimates that a senior who filed for Social Security more than 30 years ago with an average benefit level would have received about $14,000 more if the R-CPI-E had been used to calculate benefits.
COLA is a double-edged sword for low-income workers
Those receiving low-income aid may be affected by higher COLA increases. Higher benefit amounts next year could damage the eligibility of low-income benefit recipients to receive that benefit.
According to SCL’s new Seniors Priority Survey, 37 percent of participants reported receiving low-income assistance by 2021.
In 2022, about 14 percent of survey participants said their low-income benefits were actually reduced as a result of their increased Social Security benefits, and another 6 percent lost access to at least one other program. Low-income benefits programs require recipients to remain below a certain income level in order to qualify for benefits. Last year’s 5.9 percent COLA rise was one of the largest in history, pushing many over the edge of eligibility.
Should the COLA rise further in 2023, a significant proportion of seniors could find themselves in a loss-lose situation as they gradually move out of their low-assistance program thresholds, but still fail to cover inflation due to rising prices .
What it comes down to:
Significant Social Security COLA is expected by 2023 in light of continued rising inflation. The increase will certainly be welcome, but seniors will be looking for a number to at least cover the difference between their monthly allowance and rising prices.