Americans on Social Security are about to receive some of the largest benefits increases in decades to keep up with the rampant inflation generated by the Federal Reserve’s low-interest rates and the federal government’s rampant spending. Anne Tergesen reports for The Wall Street Journal:
Millions of older Americans whose budgets have been squeezed by inflation are due for a raise of sorts when the Social Security Administration announces its annual cost-of-living adjustment Thursday. The boost in monthly benefits, known as the COLA, is expected to be the highest in four decades and will go into effect in January.
What is a Social Security cost-of-living increase?
The Social Security Administration has adjusted benefits payments annually for inflation since 1975 to ensure the approximately 70 million retirees and disabled people who receive Social Security won’t see their benefits eroded by inflation.
The amount of each year’s increase is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers. The Social Security Administration compares the average inflation figures for July, August and September to the index’s average level over the same period a year earlier.
How much will the COLA rise next year?
Checks may increase by about 8.7% in 2023, according to estimates from the nonprofit Senior Citizens League, which advocates for protecting and strengthening Social Security and Medicare benefits.
The Bureau of Labor Statistics is scheduled to release September inflation data at 8:30 a.m. EST on Oct. 13. The Social Security Administration generally issues the COLA announcement soon after.
How does this coming COLA compare with recent years?
Social Security benefits rose 5.9% for this year, but the increases have generally been minor for the past decade. For 2021, the COLA rose 1.3%, and in 2020, it increased 1.6%. In 2010, 2011 and 2016, there was no COLA at all.
Why is the COLA increase expected to be so high in 2023?
The COLA is based on the rate of inflation, which has run unusually high this year.
Next year’s COLA increase is on track to be the highest since 1982 when Social Security benefits rose 11.2% during another period of high inflation.
The highest cost-of-living increase on record since the program began automatic increases in 1975 was 14.3% in 1981.
Is the COLA guaranteed to keep up with 2023 inflation?
No. This year’s 5.9% COLA failed to keep pace with inflation. Still, over time, the COLA is designed to adjust benefits to rising prices in the Consumer Price Index for Urban Wage Earners and Clerical Workers.
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