Inflation could drive Social Security benefits up 7.6% next year, analyst says
Seniors who rely on a fixed income from Social Security may feel the financial impact of rising consumer prices, with annual inflation outpacing the 2022 cost-of-living adjustment (COLA). But it There’s a silver lining for retirees — Social Security paychecks could see a much bigger boost next year.
The 2023 Social Security COLA could reach 7.6%, according to the first estimates of the Senior Citizens’ League (TSCL).
“Based on February CPI-W data — the CPI used to calculate Social Security COLA — I estimate a COLA of 7.6% for 2023,” said TSCL policy analyst Mary Johnson. “There are still six months until we receive the final announcement in October, and that estimate will change by then.”
As Johnson noted, the CPI-W (the consumer price index for urban wage earners and office workers) rose 8.6% annually in February, according to the Bureau of Labor Statistics (BLS). Therefore, the 5.9% COLA increase for 2022 may not be enough for beneficiaries who are currently facing a much higher rate of inflation.
Keep reading to learn more about the 2023 Social Security COLA predictions. And if you’re looking for ways to cut your expenses this year, you might consider paying off your higher-interest debt with a personal loan. fixed rate. You can visit Credible to compare debt consolidation offers for free without impacting your credit score.
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What to know about the 2023 Social Security COLA forecast
Social Security Administration (SSA) calculates the cost of living adjustment based on CPI-W inflation data. Although the current CPI-W notes an annual inflation rate of 8.6%, Johnson said “it’s really early to make a call about COLA, especially at a time when we’ve had some news unexpected right after the other”.
While a potential 7.6% increase in benefits may seem significant, it is not unheard of. The highest increase in COLA on record was 14.3% in 1980, SSA reports. And this is the result of the 12.4% rise in CPI-W in 1979, according to the BLS.
In 2022, the Social Security adjustment was 5.9% – the largest increase in 40 years, but well below the current annual inflation rate of 7.9%. And with the sharp increases in gas prices and energy costs fueled by the Russian invasion of Ukraine, inflation is likely to rise and continue to outpace the 2022 COLA even further.
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TSCL: inflation could “continue to erode the purchasing power of social security”
Cost of living adjustments are designed to protect the value of Social Security payments over time. However, Social Security benefits have lost almost a third (32%) of their purchasing power since 2000, according to a recent TSCL report.
“Worse still, it looks like inflation isn’t done with us yet, and the purchasing power of Social Security benefits could continue to erode well into 2022,” Johnson said in a statement.
Johnson argued that the consumer price data used to calculate COLAs does not sufficiently account for some rising costs unique to Social Security recipients, such as health care. While monthly benefits have risen 55% over the past 21 years, health care costs have risen 145% over the same period, she said.
The average monthly benefit only increased by $92 as a result of the 2022 COLA, the TSCL reported. The group said it recently received hundreds of emails from “many retired and disabled shippers describing the dire situations they face as rapidly rising inflation makes it impossible to pay bills.”
If inflation is keeping you from keeping pace with growing debt repayments, you might consider meeting with a nonprofit credit counseling agency. Credit counselors may be able to help you manage your debts and negotiate with creditors on your behalf.
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