The Social Security Administration has just announced the 2023 COLA – Cost of Living Adjustment – will be the highest since 1981. The 8.7% increase tops the previously highest increase of 5.9% in 2022. That was the highest in forty years also.
The monthly benefit increase for the average Social Security retiree will be $146 per month, from $1,681 in 2022 to $1,827 in 2023.
My question is, will it be enough?
Seniors living on fixed incomes have struggled with dramatic increases in fuel, home heating expenses, food prices, prescription drugs and housing costs. The pandemic economy wasn’t kind to seniors, and recent market turbulence hasn’t given anyone confidence in the short or long term economy.
The COLA may be big from a statistical viewpoint but the COLA is just that – – an adjustment for increased costs. The U.S. Bureau of Labor Statistics reported that over the last twelve months, the all items index increased 8.2 percent before seasonal adjustment. In June, inflation hit a high of 9.1 percent.
Shelter, food, and medical care indexes were the largest of many contributors to the increase, partly offset by a 4.9 percent decline in the gasoline index. *
While this is a much-needed increase for the millions of Americans who depend on Social Security either for their entire retirement income or as a part of their retirement income, no one’s getting rich on the increase. The goal of the increase is simply to provide some relief to seniors.
The COLA is based on the inflation rate during the third quarter of the year, July through September. Critics don’t agree with the method of calculating the COLA, arguing that it doesn’t reflect the financial reality facing older Americans.
Seniors spend less on gas and transportation, but more on medical costs.
Income levels will determine whether or not beneficiaries will be able to keep their COLA increase after Medicare Part B premiums and taxes are considered. The standard Medicare Part B premiums are expected to decrease by $5.20 next year. They are usually deducted directly from Social Security benefits.
The hope is that the 2023 COLA, combined with the lowered Medicare costs may be helpful. There will also be some lowered costs resulting from the Inflation Reduction Act, but unfortunately, the provisions from the Act don’t go into effect until 2025.
*U.S. Bureau of Labor Statistics: Consumer Price Index Summary (October 13, 2022)