The estimate is based on the June reading for an inflation measure, which the Social Security Administration uses to calculate the annual cost of living adjustment, or COLA. It’s up 9.8% over the last 12 months, compared to 9.1% year-on-year increase for the broader and better known Consumer Price Index for All Urban Consumers.
How much retirees, disabled Americans, and other buyers will actually receive will not be determined until the fall. The official adjustment, released by the agency in October, is based on average inflation in the third quarter as measured by the Consumer Price Index for Urban Wage-Ware and Office Workers, known as the CPI-W.
The league said the 2023 adjustment could be 11.4% if inflation rises in the next three months. If price increases are moderate, the benefit increase could be 9.8%.
In May, the league had forecast the correction would rise 8.6% based on inflation at that point.
Whatever it was, the adjustment will likely be the largest since the early 1980s, when seniors received a double-digit increase for the last time.
Bills that exceed benefits
“Inflation is so high, and much higher than the 5.9% COLA that people take, they’ve had a shortfall in benefits,” Johnson said. “If people don’t have enough retirement savings or cash to come easily, people are putting more money into consumer credit cards,” he said.
Half of seniors said they had to spend their emergency savings in the past year, according to a survey the league conducted between January and March. That compares to 36% in a survey last year.
According to a separate study from the league, Social Security benefits have lost 40% of their purchasing power since 2000 due to high inflation. The purchasing power of the right fell 10 percentage points between March 2021 and last March, the biggest drop since the study began in 2010. Johnson said the loss is even greater now as inflation continues to rise this year.
Lower Medicare premiums possible
He expects the 2023 premium to be lower than this year’s premium, although the final determination will be made in the fall.
While many older Americans can use the extra money, a big adjustment could actually hurt low-income seniors. This is because qualifying for government benefits like food stamps can push them above their income line or require them to start paying taxes on benefits.
According to a survey by the League, about 39% of seniors receiving benefits said their benefits were reduced due to heavy adjustments for 2022, while 15% said they lost access to at least one program.
Also, some experts are concerned that a major adjustment could deplete Social Security’s trust funds faster.
In their annual reports, the program’s board of trustees have assumed inflation to be 4.5% in 2022 and 2.3% in 2023 – though the actual numbers will likely be much higher than that, Charles Mason University’s senior research strategist and former public trustee at the Mercatus Center. Blahous said at a recent Committee on Social Security and Medicare, the forum for Responsible Federal Budget.
Leave a Comment