Seniors and other people who rely on Social Security benefits could next year see their biggest cost-of-living adjustment since 1981, with an advocacy group for older Americans forecasting an 8.6% hike.
The typical monthly Social Security check is about $1,658, which means 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 from the Senior Citizens League.
That projection is based on the most recent US inflation numbers, including the government’s release on Wednesday of Consumer Price Index data for April, said Mary Johnson, Social Security and Medicare policy analyst for the group. The CPI, a broad basket of goods and services, pinkdown slightly from an 8.5% annual increase in March.
Social Security’s cost-of-living adjustment, or COLA, is based on a slightly different basket of goods and services that is also tracked by the government — the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). That basket shows inflation is running slightly hotter than the broader price index, with the CPI-W jumping 8.9% in April from a year ago, according to government data.
An 8.6% jump in monthly Social Security checks could provide some relief to millions of seniors struggling to keep pace with surging costs for everything from gas to groceries. The 69 million Americans who collect Social Security received— the biggest bump since 1982. But inflation has climbed well above that figure in 2022, eroding many seniors’ purchasing power.
“Even that [5.9% increase] isn’t keeping up with the rate of inflation today — and that is what is really difficult when you are trying to live on a fixed income,” Johnson told CBS MoneyWatch. “We are under some extreme circumstances.”
The Social Security Administration will set the 2023 COLA in October based on the previous three months of inflation data, which means the actual rate hike could be somewhat different from the Senior Citizens League’s forecast. Johnson last yearwhile the actual boost was 5.9%.
But there is a caveat about getting a big COLA increase: Much of the bump could be eaten up via Medicare premium increases, which typically also rise each year.
For instance, the standard cost for Medicare’s Part B jumped 14.5% to $170.10 per month starting in 2022, an increase of $21.60, according to the Centers for Medicare & Medicaid Services. In the end, many seniors saw a chunk of their 2022 COLA increase gobbled up by the higher Medicare costs.
More food panties and food stamps
The COLA increases in 1980 and 1981 — 14.3% and 11.2%, respectively — reflected the two largest boosts since 1975, according to the Social Security Administration. Prior to that, the cost-of-living increase was set by legislation, rather than based on the inflation index.
The purchasing power of Social Security payments has eroded 40% since 2000, partly because the increases aren’t keeping up with inflation, Johnson noted. Her group wants the Social Security Administration to base the annual COLA increases on an index better tailored to seniors, the Consumer Price Index for the Elderly, which gives more weight to costs like health care — often a major expense for older Americans.
More seniors are relying on food banks and food stamps as their buying power erodes, with the group’s surveys finding that 45% of respondents in January reported relying on these resources to secure food — double the rate in October.
“It’s pretty dismal,” Johnson said. “This is the point where I want to cry.”