Each year Social Security beneficiaries brace for the announcement of the cost-of-living adjustment (COLA) to see how much their benefits will increase the following year. In 2023 beneficiaries might see their largest increase in benefits in over a decade based on current formulas. Social Security’s COLA will be implemented in January of 2023 and the exact amount of the increase will be decided later this year, but it is clear that inflation is the catalyst for a large increase in benefits for 2023. The COLA is for all types of Social Security benefits including retirement and disability.
An article from Forbes estimated that the COLA increase for Social Security beneficiaries could be anywhere from 8.6 percent to 10.5 percent based on the COLA formula used. The Consumer Price Index is used to determine the COLA formula for Social Security and the CPI showed prices of goods rising by more than 9 percent over the last 12 months. Below is a description of the CPI from the Bureau of Labor Statistics through the Department of Labor and shows just how much the CPI has risen over the last year due to inflation.
The all items index increased 9.1 percent for the 12 months ending June, the largest 12-month increase since the period ending November 1981. The all items less food and energy index rose 5.9 percent over the last 12 months. The energy index rose 41.6 percent over the last year, the largest 12-month increase since the period ending April 1980. The food index increased 10.4 percent for the 12-months ending June, the largest 12-month increase since the period ending February 1981.
If the increase in benefits comes in at the high range of 10.5 percent it would mean an extra $175 per month for the average Social Security recipient, but inflation as we are taught is not necessarily a good thing. Although beneficiaries will see a significant increase in benefits you have to remember that costs of goods and services is also high and the question is will the increase in benefits keep up with the rate of inflation?
