The 2023 Social Security Cola Forecast Is
Excellent News For Retirees
High inflation has devastated the US economy this year, prompting a stock market crash that has wiped out more than $3 trillion from retirement assets.
Millions of Americans have dipped into savings to pay for gas, groceries, and bills. Inflation has hit seniors who rely on Social Security especially hard.
Rising prices affect benefit recipients. Medicare Part B premiums rose 14.5% this year, a record high. In August, seniors paid more for electricity, natural gas, and home heating oil.
This means that the 5.9% COLA applied to Social Security income in 2022 severely overestimated the direction of inflation.
According to The Senior Citizens League (TSCL), the 2022 COLA has gone short by 48% through August, implying that the typical claimant has been shortchanged $417 year to date.
According to TSCL's estimates, the cost-of-living adjustment (COLA) for 2023 is on track to reach an all-time high of 8.7%.
That means the average retired worker might receive an extra $146 per month in benefits, but there's another reason an 8.7% COLA would be great news for seniors.
Inflation reduces the purchasing power of money, but COLAs are intended to counter this impact by ensuring that Social Security benefits maintain pace with growing prices.
According to TSCL, Social Security payouts have lost 40% of their purchasing power over the last two decades.
For example, if COLAs were based on the CPI-E, seniors would have gotten an additional $5,800 in benefits during the last two decades.
The official COLA for 2023 cannot be estimated until the Bureau of Labor Statistics releases its September inflation data on October 13th.
That means that the actual COLA applied to benefits next year could be slightly more or lower than 8.7%.