Inflation could give Social Security recipients a record $1,700 increase next year
Social Security Administration slated to release final COLA in October
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Social Security recipients are on track to receive the biggest cost-of-living adjustment (COLA) in four decades as stubbornly high inflation rapidly diminishes the buying power of retired Americans.
The Senior Citizens League, a nonpartisan group focusing on issues relating to older Americans, estimated the adjustment could be 8.7%, based on August inflation data, which showed that consumer prices soared 8.5% from the previous year, near a multi-decade high.
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 8.7% over the past year.
Should Social Security beneficiaries see an 8.7% increase in their monthly checks next year, it would mark the steepest annual adjustment since 1981, when recipients saw an 11.2% bump. The COLA prediction for 2023 from the Senior Citizens League is slightly lower than its previous 9.6% estimate.
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In this photo illustration, a Social Security card sits alongside checks from the U.S. Treasury Oct. 14, 2021, in Washington, D.C. (Kevin Dietsch/Getty Images / Getty Images)
An increase of that magnitude would raise the average retiree benefit of $1,656 by about $144 per month or roughly $1,729 annually, the group said.
"A COLA of 8.7% is extremely rare and would be the highest ever received by most Social Security beneficiaries alive today," Mary Johnson, a policy analyst at the Senior Citizens League who conducted the research, said. "There were only three other times since the start of automatic adjustments that it was higher."
The Social Security Administration will release the final adjustment percentage in October.
A shopper looks at organic produce at a supermarket in Montebello, Calif., Aug. 23, 2022. (Federic J. Brown/AFP via Getty Images) / Getty Images)
The estimated figure is unlikely to change much given that there will be — at most — just one more month of inflation data before the final adjustment is released.
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The decades-high benefit increase is not always good news for recipients, according to Johnson. Higher Social Security payments are a bit of a Catch-22. They can reduce eligibility for low-income safety net programs like food stamps and can push people into higher tax brackets. More significant payments, essentially, do not necessarily result in more money in people's pockets.
"There can be some very long-term effects to high inflation COLAs," Johnson previously told FOX Business. "It's like a no-win situation."
A couple looks over a Social Security check. (iStock / iStock)
The average benefit in 2022 jumped by 5.9%, which amounted to an average monthly increase of $92 for retired Americans, bringing the total amount to $1,657, the Social Security Administration announced last year. Soaring inflation has already eroded the entirety of the increase, however, with recipients losing 48% of their buying power as of August, according to calculations by the Senior Citizens League.
The average monthly benefit would have to increase by $417.60 for retirees to maintain the same level of purchasing power as in 2000.
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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 tracks explicitly the spending of households with people aged 62 and older.