Social Security Recipients are on track to receive the largest increase in the cost of living in four decades, as soaring inflation is rapidly reducing the purchasing power of retired Americans.
The Senior Citizens League, a non-partisan group focusing on issues concerning older Americans, estimated that the adjustment could be as high as 8.9% based on March inflation data, which showed that consumer prices rose 8.5% from the previous year , the fastest year-jump over years since December 1981.
The annual social security change is calculated on the basis of the consumer price index for urban and office workers, or CPI-W, which has risen 9.4% over the past year.
“I have never seen my estimates as high as what I see right now,” Mary Johnson, a Social Security analyst for the Senior Citizens League, told FOX Business. “The 8.9% would be the highest since 1981.”
Should social security beneficiaries see an increase of 8.9% to their monthly checks next year, it would mark the steepest annual adjustment since 1981, when beneficiaries saw a bump of 11.2%. The Senior Citizens League previously predicted that COLA for 2023 could be 7.6%.
The Social Security Administration releases the final adjustment rate in October.
The estimated figure may still be subject to change and ultimately depends on whether inflation has peaked or will continue to rise. Several economists said there are signs that inflation may slow, with a rise in gas prices accounting for a large part of the price rise last month. Excluding gas and food, which are more volatile measurements, so-called core inflation actually fell slightly between February and March.
However, other economists have noted that the outlook remains uncertain as volatile things like the Russian war in Ukraine and the COVID-19 pandemic threaten to shake global markets further.
The average benefit in 2022 increased by 5.9%, corresponding to a monthly increase of $ 92 for the average retired American, bringing the full amount to $ 1,657, the Social Security Administration announced last year. But the sharp inflation has already eroded the entire increase according to calculations from the Association of the Elderly.
At the end of April, the total lack of an average benefit was $ 162.60.
“Inflation means lower savings, and for people who do not have enough savings, it can mean higher debt,” Johnson said. “And the rising interest rates, especially on consumer credit card debt, can be very expensive for people living on a fixed income and difficult to manage when they retire.”
Since 2000, social security services have lost about 30% of their purchasing power due to inadequate adjustments that underestimate inflation and rising health care costs, according to the Senior Citizens League.
The group has pushed Congress to pass legislation that will index the adjustment to inflation specifically for seniors, such as the consumer price index for the elderly or the CPI-E. This index specifically tracks the consumption of households with persons aged 62 and older.