What will the average retiree’s benefit be for 2023 with the predicted COLA for next year?

The latest inflation figures were released on Tuesday, highlighting the year-on-year rate of price increase in August. The Consumer Price Index report found that prices had risen 8.3% when compared to the same month in 2021, slightly slower than the figure of 8.5% recorded in July.

However for a second consecutive month the rate of inflation has comfortably exceeded 8%, coming at a point of the year that is crucial for some 70 million Social Security recipients across the country.

Every year the Social Security Administration (SSA) announces a cost-of-living adjustment (COLA) increase to the monthly payments received by Social Security beneficiaries. The size of the increase is based on the rate of annual price increase in the third quarter of the year; July, August and September.

Know that figures for two of the three months have been released, advocacy group The Senior Citizens League (SCL) have announced that they estimate a COLA increase for 2023 of 8.7%. For the average retiree this would increase their monthly benefit by $144.10, to $1,656.

A statement from the SCL reads: “Without a COLA that adequately keeps pace with inflation, Social Security benefits purchase less and less over time, and that can create hardships especially as older Americans live longer lives in retirement.”

Experts predict the highest COLA increase for 40 years

Last year the SSA announced a COLA increase of 5.9%, in a bid to ensure that Social Security payments would keep up with the rate of inflation. That figure far exceeded anything in recent years and was the largest single increase to Social Security payments since 1981.

But while that substantial boost was hoped to shield people from inflationary pressures, the high rate of price increases continued into 2022 and estimates now suggest that the benefits are worth, in real world terms, far less than they were before the pandemic.

The SLC report explains: “Based on inflation through August, we calculate that the COLA for August 2022 has fallen short on average by 48%. A $1,656 benefit is short about $43.80 per month on average and by a total of $417.60 year to date.”

The SSA will be keen to avoid a repeat and the sustained high rate of inflation is tipped to bring another historic raise. However it will almost certainly fall short of the 11.2% COLA figure implemented in 1981, when inflation in the United States was running at 13.5%.

The final figure for the 2023 increase will be announced on 13 October, shortly after the inflation data for September is released.