Seniors could see Social Security boost of $1,729 next year
The nearly 70 million older Americans and others who receive Social Security benefits could get an average bump of $1,729 next year, which for most would amount to the biggest increase ever.
Given current inflation trends, the Social Security Administration is likely to boost monthly payments by 8.7%, which would mark the highest increase since 1981, according to the Senior Citizens League, a nonpartisan group that advocates for older Americans. The only years when COLA increases have exceeded 8.7% were in 1979, 1980 and 1981, a period when the U.S. was also experiencing a bout of high inflation.
Many seniors have suffered financially as this year's cost adjustment, 5.9%, has lagged the hottest inflation in 40 years. While the Senior Citizens League expects a boost of 8.7% for next year, their current forecast is almost a full percentage point lower than their earlier prediction that seniors would see a 9.6% bump.
Under the most recent forecast, seniors would receive an average monthly increase of $144.10, or about $1,729 for the year. A month ago, the Senior Citizens League had forecast a monthly increase of $159, or $1,900 annually.
The scaled-down forecast is due to a drop in the inflation index used by the Social Security Administration to set its annual cost-of-living adjustment, called the CPI-W, explained Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League.
The CPI-W, or the Consumer Price Index for Urban Wage Earners and Clerical Workers, rose 8.7% in August, compared with an 8.9% jump in July. But the CPI-W doesn't accurately reflect seniors' spending habits, given that it gives greater weight to gasoline and transportation costs — expenditures that are common among workers who commute, rather than retirees, Johnson noted.
Gas costs have sharply declined in recent weeks, but that may not impact seniors as much as other costs that have continued to rise, such as for food and health care, she added.
"Indications are that the COLA will not reflect pockets of persistently high inflation affecting retired and disabled Social Security recipients," Johnson said in an email to CBS MoneyWatch.
Eroding buying power
Johnson said she's hearing concerns from her group's members that the 2023 COLA won't be sufficient. Seniors rank food costs as their fastest-growing expenditure, followed by housing and transportation.
Prices for groceries and other food prepared at home soared 13.5% last month, according to labor data released on Tuesday. Some Americans are trimming their grocery purchases as a result, with a new Mass Mutual study finding that about 4 in 10 consumers are cutting back on beef and packaged goods.
"The buying power of Social Security benefits has occasionally improved in the past, but that may not be enough if retirees have spent down their savings to stay afloat in years when inflation was going up," Johnson said. "The life boat is leaking and taking on water."
COLA announcement: October 13
The Social Security Administration bases its annual COLA adjustment on inflation data from July, August and September, which means the agency is still waiting for one more month of data.
The official COLA announcement will be made on October 13, following the Labor Department's release of September inflation numbers, Johnson said.
Another unknown at this point is whether seniors will face an increase in their Medicare Part B premiums, which covers doctors visits and outpatient care as well as some drugs. Seniors in 2022 got hit by a 14.5% hike for the Part B premium, gobbling up much of the 5.9% boost in Social Security.
Last year's Medicare premiums jumped due to the plan's coverage of the costly and controversial Alzheimer's drug Aduhelm. But Medicare has since said it would restrict use of Aduhelm, while its manufacturer cut the drug's price.
Because of those developments, it's possible that Part B premiums may not increase much in 2023, which would provide some relief to seniors, experts note.