Social Security boost: Cost-of-living increase for 2023 on pace to be largest since 1981

WASHINGTON — More than 70 million Americans receiving Social Security benefits could reap the largest annual cost-of-living increase in more than four decades in 2023, according to government inflation data released Tuesday.

The Social Security Administration will not announce the formal 2023 figure until Oct. 13, after the release of September inflation data, but the August figures released Tuesday point toward recipients receiving 8.7% more per month, The New York Times reported.

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According to CNBC, the calculation is based on consumer price index data released Tuesday, which showed inflation rose 8.3% year-over-year through August, fueled primarily by “volatile energy and food costs.”

The Senior Citizens League, a nonpartisan group that lobbies for seniors, calculated the estimate, which is nearly 10% below its 9.6% prediction for 2023 issued last month yet the largest since 1981, when the inflation adjustment - often referred to as COLA - was 11.2%, the Times reported.

The league’s 8.7% estimate for 2023 means average monthly retirement benefits would increase by roughly $144. By comparison, the 2022 COLA increase was 5.9%, CNBC reported.

“Even though it’s not as high as we were predicting back in June, it’s still going to be the highest in four decades,” Mary Johnson, the league’s Social Security and Medicare policy analyst, told the network.

According to CNBC, the following factors can still influence the final 2023 COLA figure, affecting how much money is added to monthly checks:

  • September inflation data: The Social Security COLA is calculated by comparing year-over-year third-quarter Consumer Price Index for Urban Wage Earners and Clerical Workers. The third quarter does not end until Sept. 30, meaning any comparisons made before all third-quarter data is collected are only estimates, and roughly two weeks remain in which inflation could adjust the league’s current estimate.
  • Interest rate hikes: The Federal Reserve implemented a second consecutive 0.75 percentage point interest rate hike in July, and an identical rate increase could be enacted later this month, which Johnson told the network could affect consumer confidence.
  • Medicare Part B premiums: These premiums, which cover outpatient services such as doctors’ visits, are typically deducted directly from Social Security checks, and the standard Part B premium for 2022 is $170.10. Medicare trustees forecast no increase for 2023 premiums in their annual report released in June, but the official premium for the coming year will not be announced formally until November, meaning the figure could change.

According to the Times, Americans over the age of 65 make up the lion’s share of Medicare recipients at 52.3 million, with a broader group that includes survivors of beneficiaries and people receiving disability benefits and Supplemental Security Income - the program for very low-income people - accounting for the balance.