Inflation could raise Social Security COLA by about 10% by 2023

With inflation at a nearly 40-year high, Social Security could see a historic boost next year to help seniors keep up. The most recent estimate for a cost of living adjustment in 2023 is 9.6%, said Mary Johnson, social security and health care policy analyst for senior advocacy group the Senior Citizens League.

The July Consumer Price Index report shows that inflation has risen by 8.5% over the past 12 months, making it more difficult for those on fixed incomes, such as those on Social Security, to make ends meet.

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 “rises” or is higher than average, Johnson predicts that the COLA could rise to 10.1% by 2023. Should it be lower than the recent figures, 9.3% is more likely.

A 9.6% adjustment would increase the average monthly retirement benefit of $1,656 by $158.98, Johnson says.

The previous COLA came in at 5.9% and 9.6% this year would be huge in terms of COLA rates in the recent past.

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 in retirement, if the R-CPI-E had been used to calculate benefits.

— Georgina Tzanetos / Bankrate.com

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