High inflation continues to point to a larger Social Security cost-of-living adjustment in 2023

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Social Security recipients could see another record cost-of-living adjustment in 2023, based on the latest government data showing persistently high inflation.

But that increase may not be enough to offset the loss in purchasing power recipients have suffered over the years, according to new analysis from the Senior Citizens League, a nonpartisan advocacy group.

A popular measure of inflation, the consumer price index for all urban consumers, known as CPI-U, has risen 8.3% over the past 12 months, remaining near highs of 40 years, according to April data released Wednesday.

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Meanwhile, the index that the Social Security Administration uses to calculate cost-of-living adjustments each year, the Consumer Price Index for Urban Salaried and Office Workers, or CPI-W , increased by 8.9% over the past 12 months.

This indicates an 8.6% cost of living adjustment for 2023, based on April data, according to the Senior Citizens League.

That’s down from the group’s COLA estimate of 8.9% based on March CPI data. At that time, the CPI-W had risen 9.4% over the past year.

Social Security recipients saw their monthly checks rise 5.9% in 2022, the biggest increase in about 40 years.

Admittedly, a larger cost-of-living adjustment for 2023 is not guaranteed.

To calculate the COLA each year, the Social Security Administration compares CPI-W data from the third quarter to the third quarter of the previous year.

If inflation declines, there is the possibility of a smaller adjustment, or even no increase, for next year or in 2024.

Much will depend on how quickly the Federal Reserve’s efforts to reduce inflation by raising interest rates take effect, according to Mary Johnson, Social Security and Medicare policy analyst at Senior Citizens League.

“I think the Fed action is going to slow things down,” Johnson said.

One possibility is that inflation could turn into deflation, where prices start falling very quickly, she said.

However, even another record cost-of-living adjustment may not be enough to halt the loss of purchasing power that people who rely on these benefits have already suffered over the years.

Social Security benefits have lost 40% of their purchasing power since 2000, according to a new analysis by the Senior League.

“People who have been retired the longest have really been impacted the most because they’ve had a compounding effect where their COLA hasn’t,” Johnson said.

The group’s biggest ever drop in purchasing power occurred between March last year and this March, when it fell by 10 percentage points.

Fastest growing costs for Americans aged March 2021 to March 2022

Article Cost in March 2021 Cost in March 2022 % Increase
1. Heating oil $2.86 $5.13 79%
2. Gasoline (gallon) $2.86 $4.33 51%
3. Used vehicles (figures) 153.873 208.216 35%
4. Propane gas (gallon) $2.30 $2.98 30%
5. Eggs (dozen) $1.63 $2.05 26%
6. Lard (lb) $5.85 $7.20 23%
7. Oranges (lb) $1.27 $1.48 16.5%
8. Coffee (lb) $4.67 $5.41 16%
9. Part B health insurance premium $148.50 $170.10 14.5%
10. Ground Chuck (lb.) $4.31 $4.87 13%

Source: Senior Citizens League, based on Bureau of Labor Statistics data through March.

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