Seniors and others who depend on Social Security benefits could see their biggest cost-of-living adjustment next year since 1981, with an advocacy group for older Americans forecasting an 8.6% increase.
The typical monthly Social Security check is about $1,658, meaning beneficiaries could see an increase of $142.60 per month in early 2023, bringing the average check to about $1,800, according to a new forecast the Senior Citizens League.
That forecast is based on the latest U.S. inflation numbers, including April CPI data released by the government on Wednesday, said Mary Johnson, the group’s Social Security and Medicare policy analyst. The CPI, a broad basket of goods and services, roseslightly down from an 8.5% annual increase in March.
The Social Security cost-of-living adjustment, or COLA, is based on a slightly different basket of goods and services also tracked by the government — the Consumer Price Index for Urban Wage Earners and Office Workers (CPI-W). This basket shows that inflation is running a little hotter than the broader price index, with CPI-W up 8.9% yoy in April, according to government data.
An 8.6% increase in monthly Social Security contributions could bring some relief to millions of seniors who are struggling to keep up with the rising costs of everything from gasoline to groceries. The 69 million Americans collecting Social Security receive– the biggest rise since 1982. But inflation has soared well above that number in 2022, eroding the spending power of many seniors.
“Even that [5.9% increase] not keeping up with the rate of inflation today — and that’s really difficult when you’re trying to live on a steady income,” Johnson told CBS MoneyWatch. “We are in some extreme circumstances.”
The Social Security Administration will set COLA 2023 in October based on inflation data for the past three months, meaning the actual rate hike could differ slightly from the Senior Citizens League’s forecast. Johnson last yearwhile the actual increase was 5.9%.
But there’s a caveat to trying to hit a big COLA hike: Much of the bump could be eaten up by Medicare premium hikes, which also typically increase each year.
For example, the standard cost of Part B of Medicare increased 14.5% to $170.10 per month beginning in 2022, an increase of $21.60, according to the Centers for Medicare & Medicaid Services. In the end, many seniors saw some of their 2022 COLA increase gobbled up by higher Medicare costs.
More pantries and food stamps
COLA increases in 1980 and 1981 — 14.3% and 11.2%, respectively — reflected the two largest increases since 1975, according to the Social Security Administration. Previously, increases in the cost of living were determined by law and not based on the inflation index.
The purchasing power of Social Security payments has fallen 40% since 2000, in part because increases have not kept pace with inflation, Johnson noted. Her group wants the Social Security Administration to base annual COLA increases on an index more tailored to seniors, the Consumer Price Index for the Elderly, which gives more weight to costs like health care — often a big expense for older Americans.
More and more seniors are turning to food banks and food stamps as their purchasing power dwindles. The group’s polls found that 45% of respondents in January said they relied on these resources to secure food – twice as many as in October.
“It’s pretty grim,” Johnson said. “This is the point where I want to cry.”