The estimate is based on the June reading for an inflation target used by the Social Security Administration to calculate the annual cost of living adjustment, or COLA. It rose by 9.8% over the last 12 months, compared to the annual jump of 9.1% for the broader and more well-known consumer price index for all urban consumers.
How much more retirees, Americans with disabilities and other recipients will actually receive will not be decided until the fall. The official adjustment, which the agency publishes in October, is based on average inflation in the third quarter measured by the consumer price index for urban workers and office workers, known as the CPI-W.
If inflation increases over the next three months, the 2023 adjustment could be 1[ads1]1.4%, the league said. If price increases are moderate, the benefit could be 9.8%.
In May, the league estimated that the adjustment would increase by 8.6%, based on inflation at that time.
Whatever it is, the adjustment is likely to be the largest since the early 1980s, the last time seniors received a double-digit boost.
Bills outweigh the benefits
“Inflation has been as high and as much higher than the 5.9% COLA that people received, they have experienced a lack of benefits,” Johnson said. “If people do not have sufficient retirement or cash savings that they can easily access, people will spend more on consumer credit cards.”
Half of the seniors said they had to use emergency savings in the past year, according to a survey the league conducted between January and March. That compared to 36% in a survey done last year.
Social security benefits have lost 40% of their purchasing power since 2000 due to high inflation, according to a separate study from the league. The purchasing power of the right fell by 10 percentage points between March 2021 and last March, the largest since the study began in 2010. The loss is even greater now since inflation has continued to rise this year, Johnson said.
Lower Medicare premiums possible
It expects the 2023 premium to be lower than this year’s premium, although the final decision will be made in the autumn.
While many older Americans could spend the extra money, a major adjustment can actually hurt low-income seniors. This is because it can push them over income limits to qualify for government support, such as food stamps, or require them to start paying taxes on the benefits.
About 39% of seniors receiving help said their benefits were reduced due to the sharp adjustment for 2022, while 15% said they lost access to at least one program, according to a survey by the league.
Some experts are also concerned that a major adjustment could drain Social Security’s funds faster.
In their annual report, the program’s trustees assumed that inflation would be 4.5% in 2022 and 2.3% in 2023 – although actual figures are likely to be well above that, Charles Blahous, senior research strategist at George Mason University’s Mercatus Center and former public trustee . for Social Security and Medicare, said at a recent committee meeting of a responsible federal budget forum.