Social Security: Who’s ready for an extra $159 a month?

It’s hardly a secret that inflation has plagued consumers since the beginning of the year. For months, consumers had to dive into their savings and build up expensive debt to meet their basic needs. And we could have many more months of rampant inflation before things settle down.

To some extent, that’s good news for Social Security seniors. When inflation rises, the benefits usually increase.

In 2022, Social Security recipients received a 5.9% cost of living adjustment, or COLA. But next year’s COLA could be much more substantial — so much so that seniors have an extra $159 per month to enjoy.

Social security cards.

Image source: Getty Images.

How big will the COLA of 2023 be?

The latest consumer price index (CPI) reading for July was 8.5% year on year. That’s a big increase in the cost of consumer goods, although not as high as the June reading.

Meanwhile, part of the CPI, the consumer price index for urban wage earners and white-collar workers (CPI-W), rose 9.1% year-on-year in July. And it is the CPI-W that is used to determine Social Security increases.

Now we won’t know for sure what the 2023 COLA looks like until we have full CPI-W data for the third quarter. But based on recent figures, the impartial Senior League estimates the Social Security increase will be 9.6% next year. That would work out to an additional $159 per month for the average beneficiary.

To be clear, that doesn’t mean seniors can keep that raise in full. If Medicare Part B premiums rise, that increase will eat away at seniors’ COLA. But even if Medicare costs go up a lot, it’s pretty safe to say that seniors will still have their fair share of COLA (whereas in previous years with less generous COLAs, Medicare premium increases have rendered those increases fairly useless).

And there’s reason to believe Medicare too will not will go up a lot, namely because the program administrators recently predicted that the standard monthly premium for Part B will remain the same in 2023. When that happens, seniors can finally get ahead.

Let’s wait

The Social Security Administration usually makes its COLA announcement in the first half of October. Until then, seniors will have to wait and hope for a generous increase that will allow them to maintain their purchasing power in the face of inflation.

That said, seniors now struggling to make ends meet shouldn’t just count on a major COLA in 2023 to improve their financial prospects. Instead, those in that boat should research their spending and think about ways to cut spending, whether they’re downsizing their homes or moving to cheaper parts of the country where Social Security income goes further.

While Social Security seniors got a decent boost in 2022, inflation has been much higher than this so far. And the same could happen in 2023 — even if the benefits eventually get a huge boost.

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