How much will the Cost of Living Adjustment (COLA) go up in 2023 due to inflation?
The annual boost for Social Security recipients could far exceed last year’s increase and add hundreds of dollars to their monthly payments.
Social Security beneficiaries will be eagerly awaiting news of the cost-of-living adjustment (COLA) figure for 2023. Each year the Social Security Administration (SSA) introduces a nationwide boost to each recipient’s payment to account for the effects of inflation.
It is no secret that inflation is currently running very high and that COLA increase will be needed more than ever. The Consumer Price Index (CPI) report for last month found that inflation was running at 9.1% in June across the previous 12 months. This is the fastest rate of price increase since 1981.
The SSA uses a slightly different calculus, known as the consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), to determine the COLA figure. The CPI-W is running even higher, at 9.8% across the last year.
This has led The Senior Citizens League, a non-partisan group advising senior citizens on financial matters, to estimate that the 2023 COLA increase could be as high as 10.5%.
How much more will the average Social Security recipient get?
In 2022 the average monthly Social Security retirement benefit is $1,668, according to data provided by The Senior Citizens League. If a 10.5% COLA increase were to come into effect the average beneficiary would receive an extra $175.10 per month.
At this point, however, the size of next year’s COLA increase is purely speculation and the exact figure will be decided in the months to come. The SSA takes the average of data from the third quarter of the current year, and compares it to the equivalent data from the previous year to get an estimate of inflation.
With this in mind, the actual COLA figure could be significantly lower if prices increases slow, as they are broadly expected to do. In a White House press briefing last week, press secretary Karine Jean-Pierre said: “Looking ahead, there are a number of reasons why we expect those high prices to ease over the coming months.”
With great uncertainty regarding the inflation rate in the coming months, The Senior Citizens League has also published upper and lower estimates for the 2023 COLA increase. They calculate that if inflation were to cool the COLA boost could dip to around 9.8%, but a further increase could see that figure as high as 11.4%.
For context, the 2022 increase was 5.9%. This was the highest COLA increase in nearly 40 years, outlining the scale of 2023′s projected increase.