In 2023, Social Security recipients may experience another record cost-of-living adjustment, based on the most recent government data indicating persistently high inflation.
According to a new analysis by The Senior Citizens League, a nonpartisan advocacy group, this increase may not be enough to offset the decline in purchasing power that recipients have experienced over time.
The Consumer Price Index for All Urban Consumers, also known as the CPI-U, rose 8.3 percent over the past 12 months, remaining near highs not seen in 40 years, according to April data released on Wednesday.
According to Americans, inflation has a “negative impact” on goals.
The index used by the Social Security Administration to calculate annual cost-of-living adjustments, the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, rose 8.9 percent over the past year.
Based on April data, this indicates a cost-of-living adjustment of 8.6 percent for 2023, according to The Senior Citizens League.
This is less than the group’s previous estimate of 8.9 percent based on March CPI data. Over the previous year, the CPI-W had increased by 9.4 percent at that time.
Inflation increases 8.3% in April compared to a year ago.
In 2022, Social Security recipients received a 5.9 percent increase in their monthly payments, the largest increase in roughly four decades.
Certainly, a larger cost-of-living adjustment in 2023 is not assured.
The Social Security Administration compares third-quarter CPI-W data from one year to the next in order to compute the annual COLA.
If inflation declines, there is a chance that next year’s or 2024’s adjustments will be smaller or that there will be no increase at all.
According to Mary Johnson, Social Security and Medicare policy analyst for the Senior Citizens League, much will depend on how quickly the Federal Reserve’s efforts to tamp down inflation by raising interest rates take effect.
“I believe the Fed’s actions will slow things down,” Johnson said.
She stated that it is possible for inflation to morph into deflation, in which prices begin to fall sharply.
However, even a record-breaking cost-of-living adjustment may not be enough to reverse the loss of purchasing power that individuals who rely on these benefits have already experienced over the years.
Since the year 2000, Social Security benefits have lost 40% of their purchasing power, according to a new analysis by The Senior Citizens League.
“People who have been retired the longest have been hit the hardest, because their COLA has not kept up with inflation,” Johnson said.
Between March of last year and March of this year, the greatest decline in purchasing power ever recorded by the group was 10 percentage points.