Social Security recipients whose checks have not kept up with inflation this year could regain ground in 2023.
According to an estimate by Mary Johnson, a policy analyst for the Senior Citizen League, an advocacy group.
It would be the biggest increase since 1982.
For the average retiree who received a monthly check for $1,656 this year, the hike would mean an additional $144.10 per month in 2023, raising the typical payout to $1,800, Johnson estimates.
“A boost that much will definitely ease the (budget) squeeze” for the elderly, she says.
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What is the US inflation rate?
Pensioners have struggled to keep pace with inflation this year, with the 5.9% increase in the cost of living approved last October falling short of price increases which have averaged around 9 %. The consumer price index rose 8.3% in August from a year earlier, continuing to fall from a 40-year high but remaining elevated due to rising food prices , medical care and rent.
How much does a social security check cost per month?
The average payment of $1,656 left recipients $43.80 less per month to keep pace with actual price increases, according to the Senior Citizens League. If inflation comes down next year, as expected, Social Security recipients could close some of that gap, Johnson said.
Meanwhile, 59% of retirees surveyed by the Senior Citizens League at the end of the summer believe they will face a higher tax burden in 2022 due to the relatively large COLA of 5.9%. This includes 21% who fear having to pay taxes on their Social Security payments for the first time after falling below income thresholds.
And over a longer period, Social Security recipients have lost purchasing power. In March 2021, they lost 30% of their purchasing power since 2000, as COLAs rose by about half the cost of goods and services typically purchased by retirees, according to the league.
By March 2022, that purchasing power gap had widened to 40%, the largest such annual decline Johnson has recorded.
What will be the Social Security COLA for 2023?
The Social Security Administration bases its cost-of-living adjustment for the coming year on average annual increases in the Consumer Price Index for Urban Wage and Clerical Workers, or CPI-W, from July to September. The CPI-W largely mirrors the Broad CPI the Labor Department releases each month, but differs slightly.
Since the government released August CPI and CPI-W figures on Tuesday, Johnson could make a reasonably accurate estimate of next year’s COLA based on July and August data.
The SSA is expected to announce the actual increase after the government releases September CPI data on October 13 and the figure could change slightly from Johnson’s estimate.