Social Security recipients battling high inflation are likely to see a big boost in their monthly benefits from next year.
Thanks to the high inflation reading for August, beneficiaries could receive an additional $144 per month in 2023, according to latest estimate From the Senior Citizens League, a non-profit advocacy group.
August 11, 202202:40
The Social Security Administration’s annual cost adjustment (COLA) formula is based on inflation readings for July, August, and September. Even though inflation is at its peak this summer, the rise in prices has been much higher than in previous years.
Mary Johnson, policy analyst and editor at the Senior Citizens League, said she is currently forecasting an annual adjustment of 8.7%, which would be the biggest boost in Social Security benefits since 1981.
“A COLA of 8.7% is extremely rare and will be the highest received by most Social Security beneficiaries alive to date,” Johnson said in a statement.
Still, the increase is likely to be insufficient for many beneficiaries, Johnson said. That’s because the index based on Social Security benefit adjustments — the consumer price index for urban wage earners and clerical workers — is heavily weighted toward changes in gas prices. It is a commodity on which many people with fixed income spend comparatively less money.
“Across the board, retirees and disabled Social Security recipients spend a substantial portion of their income on health care costs, housing and food, and less on gasoline,” she said. “Over the past 12 months, they rank food costs as their fastest-growing expenses, housing and transportation, in that order.”
The final net benefit for Social Security recipients will also depend on how much Medicare Part B premiums increase.
But Johnson said Medicare administrators indicated earlier this year that premium growth could be low, or even non-existent, next year.
That’s because the most recent increase, 14.5%, has proved unnecessarily large, as it was largely tied to the price of an Alzheimer’s drug, which has since halved the price.
“The Centers for Medicare and Medicaid Services (CMS) agreed that beneficiaries are being charged more for their Part B premiums in 2022, [however] Beneficiaries will not receive a refund this year,” Johnson wrote in a follow-up email. “CMS says it will use additional premium charges to offset Part B premium increases for 2023.”
A CMS spokesperson declined to comment. An official announcement on Medicare Part B premium costs is expected this fall.
Johnson said fixed-income people have been hit hardest by 40 years of high inflation rates, meaning benefit payments have not been able to keep pace with rising prices this year. As an example, the Senior Citizens League estimates that, based on inflation rates through July, the $1,656 monthly Social Security benefit should be about $58 less than the average per month.
August 10, 202204:55
For most beneficiaries, the increase to come will still be less than what recipients need to catch up with price increases on food and other consumer goods, Johnson said. Already, 37% of participants surveyed by the Senior Citizens League said they received low-income aid in 2021. This is up from the 16% who were receiving need-based aid before the pandemic.
“Social Security was never designed to be the only source of income for people,” Johnson said.
The Social Security Administration is expected to announce a 2023 cost of living adjustment in October, following the release of Consumer Price Index data for September.
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