Inflation at a Record High Could Result in a Larger Social Security Cost-of-living Adjustment in 2023.

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Social Security recipients will receive a 5.9 percent cost-of-living adjustment to their monthly checks beginning in 2022, the highest increase in nearly 40 years.

However, as inflation rises month after month, the purchasing power of those benefit increases has dwindled.

According to March data released by the U.S. Bureau of Labor Statistics on Tuesday, the Consumer Price Index for All Urban Consumers, or CPI-U, rose 8.5 percent from a year ago.

 

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Meanwhile, the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, a measure used by the Social Security Administration to calculate the annual cost-of-living adjustment, or COLA, increased 9.4 percent in the last year.

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According to The Senior Citizens League, a nonpartisan senior organisation, the average retiree benefit in 2022 will be $1,656.30, up from $1,564, a $92.30 increase per month.

According to The Senior Citizens League, if those benefits kept up with inflation, the average retiree benefit would have to be $1,711 based on March data, an increase of $147 from the average retiree benefit for 2021.

According to the group’s calculations, the average retirement benefit has a $162.60 shortfall so far this year.

Retirees are feeling the pinch as prices in key categories such as food, housing, home heating, and prescription drugs continue to rise. The standard Medicare Part B premium increased by 14.5 percent to $170.10 per month in 2022.

In March, inflation rose to 8.5 percent, the highest level since December 1981.

 

Inflation at an all-time high may indicate a larger COLA in 2023.

The Senior Citizens League estimates the COLA for 2023 to be 8.9 percent based on March data released on Tuesday. This is an increase from the group’s previous estimate of a 7.6 percent COLA for next year.

Future months’ CPI-W data would, of course, be factored into the official COLA calculation for next year. In order to determine whether there is a COLA increase, the Social Security Administration typically takes the average of the CPI-W for the third quarter of the current year and compares it to the average for the third quarter of the previous year.

Some experts believe peak inflation will occur sooner rather than later.

“The worst may be behind us,” Furman speculated.

According to Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League, inflation began to accelerate in March 2021, and it may reach a tipping point this year, with a potential moderation in the coming months.

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If this occurs, the estimated Social Security COLA for 2023 will be reduced.

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