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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 spending 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 the CPI-U, rose 8.3% over the past 12 months and remained near 40-year highs, according to April data released on Wednesday.
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Meanwhile, the index that the Social Security Administration uses each year to calculate the cost-of-living adjustment, the consumer price index for urban wage earners and office workers, or CPI-W, rose 8.9% over the past 12 months.
This suggests an 8.6% cost of living adjustment for 2023, based on April data, according to The Senior Citizens League.
That’s less than the group’s COLA estimate of 8.9%, which is based on March CPI data. At the time, the CPI-W was up 9.4% year-on-year.
Social Security recipients saw their monthly checks increase by 5.9% in 2022, the highest increase in about 40 years.
A larger inflation adjustment for 2023 is of course not guaranteed.
To calculate COLA each year, the Social Security Administration compares the third quarter CPI-W data to the third quarter of the previous year.
If inflation eases, there is a possibility of a smaller adjustment or no increase at all for next year or 2024.
Much of that will depend on how quickly the Federal Reserve’s efforts to curb inflation through interest rate hikes take effect, according to Mary Johnson, a Social Security and Medicare analyst at the Senior Citizens League.
“I think the Fed’s actions will slow things down,” Johnson said.
One possibility is that inflation could turn into deflation, where prices start falling very quickly, she said.
But even another record-high cost-of-living adjustment may not be enough to halt the loss of purchasing power that people who depend on these benefits have already experienced over the years.
Social Security benefits have lost 40% of their purchasing power since 2000, according to a new analysis by the Senior Citizens League.
“People who have been retired the longest really were hit the hardest because they had a cumulative effect that their COLA couldn’t match,” Johnson said.
The sharpest drop in purchasing power on record by the group occurred between March last year and this March, when it fell 10 percentage points.
Source: Senior Citizens League, based on Bureau of Labor Statistics data.
Source: Senior Citizens League, based on Bureau of Labor Statistics data through March.
https://www.cnbc.com/2022/05/11/high-inflation-points-to-bigger-social-security-cola-in-2023.html High inflation points to larger Social Security COLA in 2023