Get ready for another big bump in Social Security payments, at least if one prediction pans out.
Recipients can expect their 2023 Social Security benefit to grow by 9.6% after an adjustment for inflation, according to new projections by the Senior Citizens League.
If the prediction proves true, it would mark the highest cost of living adjustment — or COLA — for Social Security since 1981.
A 9.6% COLA would push the average monthly Social Security retirement benefit — currently at $1,656 — up by $159.
The Senior Citizens League based its forecast on the latest round of inflation data, which the U.S. Bureau of Labor Statistics released today.
The monthly inflation rate was 1.3% in July, unchanged from June. However, the annual inflation rate was 8.5% in July, down from 9.1% in June.
A large COLA would follow on the heels of a 5.9% increase in Social Security for 2022. That was the biggest rise in decades, although the projected 2023 increase would dwarf it.
The federal government makes COLAs on an annual basis as a way of counteracting the effect of inflation. As we have reported:
“By law, Social Security COLAs are tied to the federal government’s Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, for the third quarter of the year — specifically, the change in the index since the same period of the prior year.”
In times when inflation is especially low, there is no COLA. However, in periods of high inflation — such as now — the size of checks can jump.
Of course, a big COLA isn’t especially helpful if prices are rising. But COLAs at least help Social Security recipients to keep pace with the higher cost of living.
September marks the final month of the third quarter of 2022, and the August and September inflation numbers also will impact the COLA for 2023. So, it is possible, if not likely, that inflation data related to those two months will change the current COLA projection of 9.6%.
According to the Senior Citizen League, if inflation cools a bit, next year’s COLA might come in a bit lower, at around 9.3%.
On the other hand, a surge in inflation between now and the end of the quarter could push next year’s COLA as high as 10.1%.
To learn more, check out “The Social Security COLA the Year You Were Born.”