Seniors and others who rely on Social Security benefits may face their largest cost-of-living adjustment since 1981 next year, according to an advocacy group for older Americans, with an 8.6 percent increase predicted.
According to a new Senior Citizens League forecast, the average monthly Social Security check is about $1,658, so beneficiaries could see an increase of $142.60 per month in early 2023, bringing the average check to about $1,800.
That projection is based on the most recent U.S. inflation figures, including the government’s release of Consumer Price Index data for April on Wednesday, according to Mary Johnson, the group’s Social Security and Medicare policy analyst. The CPI, a broad basket of goods and services, increased 8.3 percent year on year in April, down from an 8.5 percent annual increase in March.
The cost-of-living adjustment, or COLA, for Social Security is based on a slightly different basket of goods and services that the government also tracks — the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). According to government data, the CPI-W rose 8.9 percent from a year ago in April, indicating that inflation is running slightly hotter than the broader price index.
An 8.6 percent increase in monthly Social Security payments could provide some relief to millions of seniors who are struggling to keep up with rising costs for everything from gas to groceries. The 69 million Americans who receive Social Security benefits received a 5.9 percent COLA increase in January, the largest increase since 1982. However, inflation has risen well above that figure by 2022, eroding the purchasing power of many seniors.
“Even that [5.9 percent increase] isn’t keeping up with the rate of inflation today,” Johnson told CBS MoneyWatch. “We are in unusual circumstances.”
The Social Security Administration will set the 2023 COLA in October based on inflation data from the previous three months, which means the actual rate hike may differ from the Senior Citizens League’s forecast. Johnson predicted a 6.1 percent COLA increase last year, but the actual increase was 5.9 percent.
More food pantries and food stamps are needed.
According to the Social Security Administration, the COLA increases in 1980 and 1981 — 14.3 percent and 11.2 percent, respectively — were the two largest since 1975. Previously, the cost-of-living increase was determined by legislation rather than the inflation index.
According to Johnson, the purchasing power of Social Security payments has declined by 40% since 2000, owing in part to increases that have not kept pace with inflation. Her organization wants the Social Security Administration to base annual COLA increases on a more senior-friendly index, the Consumer Price Index for the Elderly, which gives more weight to costs such as health care, which is often a major expense for older Americans.
As their purchasing power dwindles, more seniors are turning to food banks and food stamps, according to the group’s surveys, with 45 percent of respondents in January reporting relying on these resources to secure food — more than double the rate in October.
“It’s pretty depressing,” Johnson said. “I’m ready to cry at this point.”