Social Security COLA for 2023 Could Increase 10.8% If Inflation Remains on Pace
It’s a near-certainty that the 2023 cost-of-living adjustment for Social Security recipients will be the biggest in decades to help offset skyrocketing inflation. The question is how big the COLA will be. According to one estimate, it could push into double digits for the first time in 41 years.
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Based on current inflation trends, the Social Security COLA for 2023 could be as high as 10.8%, according to a new analysis from the non-partisan Committee for a Responsible Federal Budget. That would be the biggest bump since 1981, when the COLA was 11.2%, CBS News reported.
A lot depends on whether (and how much) inflation eases in the coming months. As previously reported by GOBankingRates, the Social Security COLA is calculated by using the average rate of inflation in the third quarter of the year. When those figures come out, the data for July, August and September will be added together and divided by three to get the average. The 2022 number will then be compared with the third quarter average of 2021 to determine the percentage of change for 2023.
U.S. inflation for May rose 8.6% from the previous year, which was the largest annual increase in more than four decades. The Federal Reserve has been hiking interest rates this year to help tame inflation — including an increase of three-quarters of a percentage point on June 15, the first such hike since 1994.
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If inflation grinds to a halt during the third quarter, the CRFB estimates that next year’s COLA will be 7.3%, CBS News reported. The group’s current estimate of 10.8% is already much higher than other estimates. Following the May inflation report, The Senior Citizens League — a nonpartisan seniors advocacy group — issued a statement that it expects the Social Security COLA for 2023 to be 8.6%.
Meanwhile, CBS News noted that economists expect inflation to moderate later in 2022, which likely means the Social Security COLA increase for 2023 will fall somewhere between 7.3% and 10.8%.
Either scenario would give Social Security recipients a nice bump in benefits. Currently, the average monthly Social Security check is about $1,658 and would increase to $1,837 with a 10.8% COLA increase. Recipients would receive an average of $1,790 with a COLA increase of 8%.
Cost-of-living adjustments don’t always do a good job of helping seniors cope with higher prices, however. For example, the 2022 COLA of 5.9% has done very little to offset inflation that has been above 8% for months now.
The COLA takes effect in December, with the updated benefits paid out beginning in January 2023.
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This article originally appeared on GOBankingRates.com: Social Security COLA for 2023 Could Increase 10.8% If Inflation Remains on Pace
