(NEXSTAR) – The Social Security Administration is preparing to announce a cost-of-living adjustment (COLA) for Social Security beneficiaries in 2023, and it’s expected to be a significant increase.
Adjustments designed to keep Social Security and Supplemental Income (SSI) benefits in line with inflation are calculated each year based on recent increases in the Consumer Price Index for Urban Wage and Clerical Workers (CPI-W), which itself is ‘is one of several price indexes calculated by the Bureau of Labor Statistics. The CPI-Win fact, it is a measure of price changes “on the market basket of consumer goods and services”, writes TBM.
Based on the latest CPI-W data, the 2023 COLA adjustment is expected to be one of the largest in decades, with the nonprofit Senior Citizen’s League most recently projecting an 8.7% increase in benefits the latest CPI-W.
With this adjustment, the average retirement benefit of $1,656 will increase by $144.10.
“An 8.7% COLA is extremely rare and would be the highest most living Social Security beneficiaries have ever received,” wrote Mary Johnson, Social Security and Medicare analyst at the League of Senior Citizens , in press release issued in mid-September.
Beneficiaries can expect official notice of the 2023 COLA increase in mid-October — the 13th, specifically, according to the Senior Citizens League. That date also coincides with the release of the Consumer Price Index for September 2022. (The Social Security Administration pointed to the BLS’ online schedule for all release dates.)
Despite the announcement later this month, the benefits increase won’t take effect for the nation’s roughly 66 million Social Security beneficiaries until January 2023. Those who receive SSI always see their first adjusted benefits near the end of December of the previous calendar year.
The Social Security Administration recently estimated that Social Security benefits make up the collective 30% of income older Americans. That’s a significant portion, although the Senior Citizens League worries that the projected 8.7% COLA increase in 2023 still won’t be enough to meet the needs of most seniors.
Johnson of the Senior Citizens League argued that the CPI-W specifically does not take into account the spending habits of people 62 and older and “gives more weight to gas and transportation costs,” which are not top concerns for seniors.
So when gasoline prices started to fall, the CPI-W fell with it. And the projected 2023 COLA increase — which was estimated at 9.6% in August — fell to a projected 8.7%.
“In general, retirees and the disabled spend more of their income on health care, housing and food and less on gas,” Johnson wrote in mid-September. “Over the past 12 months, they rank food spending as the fastest growing expense, followed by housing and transportation in that order.”
However, the COLA increase in 2023 is significantly higher than in 2022 (5.9%), and the largest since 1981, when beneficiaries received an adjustment of 11.2%. However, for several years the COLA was 0%.
“The purchasing power of Social Security benefits has improved at times in the past, but it may not be enough if retirees have spent their savings to stay afloat in years when inflation has been rising,” Johnson wrote.