What are the latest Social Security COLA predictions for 2023 after the June CPI?
June inflation data raised forecasts for the 2023 COLA which could nearly double the increase to Social Security benefits last year if inflation stays high.
Inflation has been taking a toll on households across the United States, none more so than those living on a fixed income. The June consumer price index report confirmed what Americans have been seeing that prices are still rising fast.
The 9.1 percent increase announced on Wednesday surpassed the previous month high which many hoped was the peak. It also caused those who predict what the annual cost-of-living adjustment (COLA) will be for 2023 to raise their estimates. Although not released until the fall, beneficiaries will be anxiously awaiting how much their monthly payments will rise to help make up for the loss of purchasing power being felt, now estimated at 40 percent less since 2000.
Social Security benefits could increase by over ten percent
Last year, the Social Security Administration announced a historic COLA for 2022 of 5.9 percent. Unless the rate of inflation drastically decreases, the increase for next year could be much bigger.
The Senior Citizens League, the largest advocacy group for the elderly, now forecasts a 2023 COLA of 10.5 percent after the June consumer price index report. That would be the largest since 1981 when the US was in the throes of another period of high inflation. This is a significant hike from predictions over the past two months when the seniors advocacy group forecast an 8.6 percent COLA.
The Committee for a Responsible Federal Budget, a nonprofit, nonpartisan organization, released its own prediction of 10.8 percent prior to the June data on price changes. The final calculation will be determined from inflation data collected in the third quarter of the year.
So, depending on what effect the aggressive rate hikes by the Federal Reserve and other economic factors have on inflation, the final 2023 COLA could be higher or lower than the predictions. The Senior Citizens League sees a 2023 COLA range from as high as 11.4 percent if the economy remains ‘hot’ and 9.8 percent at the low end if inflation runs cooler or lower than the recent average.
How much more would Social Security benefits increase?
The average Social Security retirement benefit is about $1,669 in June, and with a 10.5 percent COLA that would increase by a little over $175 next year. However, an increase in Medicare payments, which are taken directly from Social Security benefits, could eat away at any gains beneficiaries could be expecting.
There is also the issue of solvency of the Social Security Trust Fund. Without government action the program will have to start cutting benefits by 20 percent in thirteen years the trustees reported in June. However, using more recent inflation data the Committee for a Responsible Federal Budget estimates that the funds will be insolvent in 2034, a year earlier.