Inflation may lead to 7.6% increase in Social Security benefits next year, analyst says
Here's what retired workers should know about 2023 COLA predictions
Social Security recipients may see a higher COLA increase in 2023 if inflation persists, according to a nonpartisan advocacy group. (iStock)
Seniors who rely on a fixed Social Security income may be feeling the financial impact of rising consumer prices, with annual inflation outpacing the 2022 cost-of-living adjustment (COLA). But there's a glimmer of hope for retirees — Social Security paychecks could see a much larger boost next year.
The 2023 Social Security COLA could be as high as 7.6%, according to early estimates from The Senior Citizens League (TSCL).
"Based on the February CPI-W data — the CPI that’s used to calculate the Social Security COLA — I’m estimating a 7.6% COLA for 2023," TSCL policy analyst Mary Johnson said. "It’s still six months before we will get the final announcement in October though, and this estimate will change before then."
As Johnson noted, the CPI-W (Consumer Price Index for Urban Wage Earners and Clerical Workers) rose 8.6% annually in February, according to the Bureau of Labor Statistics (BLS). Consequently, the 5.9% COLA boost for 2022 may be insufficient for beneficiaries who are currently facing a much higher rate of inflation.
Keep reading to learn more about predictions for the 2023 Social Security COLA. And if you're looking for ways to cut expenses this year, you may consider paying off higher-interest debts with a fixed-rate personal loan. You can visit Credible to compare debt consolidation offers for free without impacting your credit score.
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What to know about the 2023 Social Security COLA forecast
The Social Security Administration (SSA) calculates the cost-of-living adjustment based on CPI-W inflation data. Although the current CPI-W notes an annual inflation rate of 8.6%, Johnson said "it’s really early to make a call about the COLA, especially at a time when we’ve gotten one piece of unexpected news right after the other."
While a potential 7.6% benefit increase may seem significant, it's not unheard of. The highest COLA boost ever recorded was 14.3% in 1980, the SSA reports. And this was a result of the CPI-W rising 12.4% during 1979, according to the BLS.
In 2022, the Social Security adjustment was 5.9% — the biggest increase in 40 years, but far below the current 7.9% annual rate of inflation. And with sharp increases in gas prices and energy costs fueled by the Russian invasion of Ukraine, it's likely that inflation will rise and continue to outpace the 2022 COLA even further.
If you're struggling to balance your household budget amid high inflation, it may be possible to lower your monthly debt payments with a personal loan. You can learn more about debt consolidation by visiting Credible.
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TSCL: Inflation may ‘continue to erode Social Security buying power’
Cost-of-living adjustments are designed to protect the value of Social Security payments over time. However, Social Security benefits have lost nearly a third (32%) of their purchasing power since 2000, according to a recent TSCL report.
"Even worse, it appears that inflation is not done with us yet, and the buying power of Social Security benefits may continue to erode into 2022," Johnson said in a statement.
Johnson argued that the consumer price data used to calculate COLAs doesn't adequately account for some rising costs unique to Social Security beneficiaries, such as health care. While monthly benefits increased by 55% over the past 21 years, health care costs rose 145% over the same period, she said.
The average monthly benefit rose by just $92 as a result of the 2022 COLA, the TSCL reported. The group said it recently received hundreds of emails from "many retired and disabled senders describing the dire situations they face as rapidly rising inflation makes it impossible to pay the bills."
If inflation has made it difficult for you to keep up with mounting debt payments, you could consider meeting with a nonprofit credit counseling agency. Credit counselors may be able to help you manage your debts and negotiate with creditors on your behalf.
Alternatively, you may consider consolidating your debt into a fixed-rate personal loan. Applicants with good credit may be able to save thousands in interest charges through credit card consolidation. You can browse current interest rates in the table below and on Credible's online financial marketplace.
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