Social Security recipients could receive the biggest cost-of-living raise in decades as a result of red-hot inflation, which has quickly eroded the buying power of retired Americans.
An official with the Social Security Administration estimated that benefits could see a cost-of-living adjustment as high as 8%, or an increase of about $132.64 per month, in early 2023. That would bring the average check to about $1,790. Should Social Security beneficiaries see an 8% increase in their monthly checks next year, it would mark the steepest annual adjustment since 1981, when recipients saw an 11.2% bump.
The annual Social Security change is calculated based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, or the CPI-W, which jumped 9.4% over the past year.
“Looking at the CPI-W trends we’re seeing so far this year, it’s likely we’ll have a COLA closer to 8% than to 3.8%,” said Stephen Goss, the chief actuary of the Social Security Administration, in a recent webinar with the Bipartisan Policy Center on Social Security.
The Social Security Administration will release the final adjustment percentage in October. It will take effect in December.
An increase of 8% is “good news for the beneficiaries who are currently eligible for benefits,” Goss said. “They will get a relatively high increase in their benefits.”
The estimated figure could still be subject to change and ultimately hinges on whether inflation has peaked or will remain near a record high. Many economists have warned that prices could be “painstakingly slow” to come down.
The average benefit in 2022 jumped by 5.9%, which amounted to a monthly increase of $92 for the average retired American, bringing the full amount to $1,657, the Social Security Administration announced last year. But soaring inflation has already eroded the entirety of the increase, according to calculations by the Senior Citizens League.
At the end of April, the total shortfall for an average benefit was $162.60.
Since 2000, Social Security benefits have lost roughly 30% of their purchasing power due to inadequate adjustments that underestimate inflation and rising health care costs, according to the Senior Citizens League.
The group has pushed Congress to adopt legislation that would index the adjustment to inflation specifically for seniors, such as the Consumer Price Index for the Elderly, or the CPI-E. That index specifically tracks the spending of households with people aged 62 and older.
