Social Security: How large could the 2023 COLA increase be?
The high inflation that has dominated 2022 is expected to lead to another huge COLA rise next year, according to a seniors advocacy group.
Many people are struggling under the weight of high inflation that is striking the US economy. For workers, a tight labour market gives some opportunity to negotiate pay rises so as not to be swamped. But for those reliant on money from the state, like Social Security recipients, there remains a nervous weight as inflation continues to rise, outstrpping their benefits which remain the same amount all year round.
That is why the cost of living adjustment (COLA) is so important. Around the beginning of winter, the Social Security Adminsitration announces the rate in which their payments will increase for the next year, mostly in line with inflation. The higher the inflation, the higher the rate at which benefits rise.
Last year, it was announced that the COLA rise would be 5.9 percent. This was done at a time when annual inflation stood at 6.2 percent, so was slightly behind. Now, with inflation at 8.3 percent, this increase was woefully short of what was necessary.
“Even that [5.9% increase] isn’t keeping up with the rate of inflation today — and that is what is really difficult when you are trying to live on a fixed income,” Mary Johnson, Social Security and Medicare policy analyst for the Senior Citizens League, told CBS MoneyWatch, “We are under some extreme circumstances.”
The Senior Citizens League (SCL) regularly forecasts their expectations for the COLA adjustment; their are a pressure group to support seniors after all. For 2023, the group predicts that the increase could be as much as 8.6 percent. This would smash the previous record from 1981 of 7.4 percent.
What does this increase mean in real terms?
Figures from the SSA state that the current average monthly benefit for a retired worker is $1,619.67, which means beneficiaries could see an increase of $139.29 per month in early 2023, bringing the average check to about $1,758.
Last year the SCL slightly overestimated the COLA increase by two percentage points. With inflation in flux, its rise slowed in April, there are still many months ahead before the SSA decides the increase.