(NEXSTAR) – The Social Security Administration is getting ready to announce the cost-of-living adjustment (COLA) for Social Security beneficiaries in 2023, and it’s expected to be a sizable increase.
The adjustments, which are designed to help Social Security and Supplemental Security Income (SSI) payments keep pace with inflation, are calculated each year based on recent increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which itself is one of several price indexes calculated by the Bureau of Labor Statistics. The CPI-W, essentially, is a measure of the change in prices “for a market basket of consumer goods and services,” the BLS writes.
Based on recent CPI-W data, the COLA adjustment for 2023 is expected to be one of the largest in decades: the nonprofit Senior Citizen’s League most recently projected an 8.7% increase in benefits based on the latest CPI-W.
At such an adjustment, the average retiree benefit — $1,656 — would increase by $144.10.
“A COLA of 8.7% is extremely rare and would be the highest ever received by most Social Security beneficiaries alive today,” writes Mary Johnson, the Social Security and Medicare policy analyst for the Senior Citizens League, in a press release issued mid-September.
Beneficiaries can expect an official announcement on 2023’s COLA increase in mid-October — specifically the 13th, according to the Senior Citizen’s League. The date also coincides with the release of the Consumer Price Index for Sept. 2022. (The Social Security Administration pointed to the BLS’ online schedule for all release dates.)
Despite an announcement later this month, the increased benefits wouldn’t take effect for the country’s roughly 66 million Social Security beneficiaries until January 2023. Those receiving SSI always see their first adjusted benefits near the end of December in the previous calendar year.
The Social Security Administration had recently estimated that Social Security benefits make up a collective 30% of the income of elderly Americans. It’s a sizable chunk, though the Senior Citizen’s League worries that 2023’s projected COLA increase, at an estimated 8.7%, is still not enough to address most seniors’ needs.
Johnson, of the Senior Citizen’s League, had argued that the CPI-W does not specifically take into account the spending habits of those “62 and up,” and “gives greater weight to gasoline and transportation costs,” which are not top concerns for seniors.
So when gasoline prices began to fall, the CPI-W fell with it. And 2023’s projected COLA increase — which was estimated at 9.6% in August — decreased to a projected 8.7%.
“Across the board, retired and disabled Social Security recipients spend a bigger portion of their incomes on healthcare costs, housing, and food and less on gasoline,” Johnson wrote in mid-September. “Over the past 12 months, they rank food costs as their fastest growing expenditure, housing, and transportation in that order.”
Still, 2023’s COLA increase is significantly higher than 2022’s (5.9%) and the biggest since 1981, when beneficiaries received an 11.2% adjustment. Some years, however, the COLA was 0%.
“The buying power of Social Security benefits has occasionally improved in the past but that may not be enough when retirees have spent down their savings to stay afloat in years when inflation was going up,” Johnson wrote.