Social Security checks increased by 5.9% this year relative to last, one of the biggest boosts retirees had seen in some time. And with inflation still sky-high — the consumer price index jumped 8.5% in March — they may get an even bigger increase next year.
The 2023 cost-of-living adjustment, or COLA, could be as high as 8.9%, according to a preliminary analysis released Tuesday from the Senior Citizens League, a nonpartisan seniors’ advocacy group. It’s possible it could climb even higher than that, depending on what happens with inflation in the next few months, says Mary Johnson, Social Security and Medicare policy analyst at the Senior Citizens League.
The official Social Security COLA will be announced in October, which means there is still six months’ worth of economic data to be taken into consideration before it is finalized.
“I have never witnessed inflation this high,” Johnson says. The Social Security COLA is calculated based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, a more general inflation measure than the headline Consumer Price Index for all Urban Consumers, or CPI-U. The CPI-W weights clothing, food, and transportation costs more heavily than the CPI-U.
The COLA was just 1.3% in 2021, and raised Social Security Income by an average of about $20 per month. This year, the average retiree’s checks are $92 bigger each month, says Johnson.
Though inflation is hard on all consumers, it is particularly painful for retirees who live on a fixed monthly income. Johnson points out that though 2022 and 2023 are likely to see record increases, they won’t be able to make up for years of increases that averaged around just 1.4%.
Social Security used to make up just one part of the typical senior’s retirement income, in addition to pensions and workplace savings. Pensions are rare these days, Johnson notes, and many people are not saving enough for retirement on their own, many because they cannot afford to do so.
“Because they’re not working, they have to have a good savings plan and emergency savings” to fall back on, she says. “But our brains are not wired to think long-term like that.”
While an 8.9% COLA would be welcome, it won’t be enough to account for high health-care costs in retirement, says Johnson. Workers will still need to save more on their own.
“We have plenty of unexpected or new costs, and the ones we do have are not fairly reflected in the COLA we do receive,” she says.
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