Social Security beneficiaries could see the most significant cost-of-living adjustment in more than 40 years. The inflated increase projection comes as inflation hits record highs. The most recent numbers from the U.S. Bureau of Labor Statistics show inflation in June surged to 9.1% from the previous year. The Senior Citizen’s League, a non-partisan seniors advocacy group, projects Social Security recipients will see a 10.5% cost-of-living increase. Ultimately, experts say next year’s rate will depend on the economy.
If expert predictions about the 2023 inflated COLA come true, it will be the first time the cost-of-living adjustment has reached double digits since 1982. Furthermore, it would be the highest increase since 1975 and surpass last year’s increase. Mary Johnson, a policy advisor at Senior Citizen’s League, predicts the 2023 COLA could be around 11.4% if inflation runs “hot.” However, if inflation runs “cold” Johnson says the COLA could be 9.8%. Again, she points to the fluctuating economy and efforts by the Federal Reserve to curb recent inflation. Earlier this summer, leaders raised the Federal Interest rate by 0.75% to fighting rising inflation. It was the biggest rate hike since 1994. Click here to see how rate hikes are targeting record inflation.
Inflated COLA: How it’s Calculated
The average inflation rate in the third quarter of the year determines the cost-of-living adjustment for the following year. For example, July, August, and September’s inflation rates will be added together and divided by three. This average then determines the upcoming cost-of-living adjustment.
A high COLA will be eagerly anticipated to address an ongoing shortfall in benefits that Social Security beneficiaries are experiencing in 2022 because inflation is higher than their 5.9% COLA.
Mary Johnson – Policy Advisor for Senior Citizen’s League
A 10.5% COLA would increase the average retiree benefit of $1,668 by $175.10, according to the Senior Citizens League. While the boost would be obvious benefits, the double-digit jump could bring negative impacts as well. Specifically, an inflated COLA could have major tax implications for Social Security beneficiaries. Experts predict trouble ahead unless lawmakers change the income thresholds for Social Security beneficiaries.