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Social Security beneficiaries will be in line to receive a record high cost-of-living adjustment in 2023 due to inflation. The question is exactly how high it may be.
Based on new consumer price index data for June released Wednesday, The Senior Citizens League, a nonpartisan senior group, now estimates the cost-of-living adjustment will be 10.5% for 2023.
A 10.5% COLA would amount to a $175.10 increase to the average monthly retirement benefit of $1,668, according to The Senior Citizens League.
In comparison, the group’s estimates from the past two months indicated the COLA for next year might be 8.6%.
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That’s as the Consumer Price Index for all Urban Consumers, or CPI-U, climbed 9.1% in June over the previous 12 months, the fastest pace since 1981.
Meanwhile, the measurement used by the Social Security Administration to calculate the COLA each year — the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W — shot up 9.8% over the last 12 months.
To be sure, the estimate for next year’s COLA is still tentative. The Social Security Administration calculates the annual adjustment by taking an average of the third-quarter data from the current year and comparing it with the third quarter from the previous year.
The actual increase for next year may vary depending on how high inflation is in the coming months.
“Looking ahead, there are a number of reasons why we expect those high prices to ease over the coming months,” White House press secretary Karine Jean-Pierre said at a press briefing this week.
If inflation cools in the coming months and is lower than the recent average, the COLA could be 9.8%, according to The Senior Citizens League. If instead it runs hot or higher than the recent average, the increase to benefits could be 11.4%.
In 2022, Social Security beneficiaries received a record 5.9% boost to benefits, the highest increase in about 40 years. However, since then inflation has kicked up.
To find out exactly how much more money the projected increase would mean for you, multiply 10.5% by your gross benefit amount.
Your gross benefit amount can be found on the new benefit amount forms the Social Security Administration sent for 2022 benefits, which most beneficiaries received either in December or January, according to Mary Johnson, a Social Security and Medicare policy analyst at The Senior Citizens League.
How much more money beneficiaries actually see will depend on the size of Medicare Part B premiums for next year. Medicare Part B premiums are typically deducted directly from Social Security checks. In 2022, those premiums increased 14.5% to bring the standard monthly premium to $170.10 per month, which was one of the highest jumps in the program’s history, according to Johnson.
“Beneficiaries are still smarting from this,” Johnson said.
A higher COLA for 2023 may not be all good news.
Higher-income individuals may have to pay more for Medicare Part B and Part D benefits, according to Johnson. Meanwhile, lower-income beneficiaries may see cuts to income-related benefits as their monthly checks increase, she said.
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A record high Social Security COLA for 2023 would also impact Social Security’s projected depletion dates, according to the Committee for a Responsible Federal Budget, a nonprofit, nonpartisan organization.
The annual Social Security trustees report released in June projected the program’s combined funds will be depleted in 2035, at which point 80% of benefits will be payable. That is based on data through mid-February.
Using more recent inflation assumptions, the Committee for a Responsible Federal Budget projects Social Security insolvency would occur in 2034 rather than 2035.