Seniors relying on a fixed income from Social Security may be feeling the financial hit from rising consumer prices, with annual inflation outpacing 2022 Cost of Living Adjustment (SALARY READJUSTMENT). But there is a ray of hope for retirees: Social Security paychecks could see a much bigger increase next year.
The 2023 Social Security COLA could reach 7.6%, according to early estimates from The Senior Citizens League (TSCL).
“Based on the February CPI-W data, the CPI that is used to calculate the Social Security COLA, I estimate a COLA of 7.6% for 2023,” said Mary Johnson, policy analyst at TSCL. “However, we are still six months away from receiving the final announcement in October, and this estimate will change before then.”
As Johnson pointed out, the CPI-W (Consumer Price Index for urban wage earners and white-collar workers) rose 8.6% annually in February, according to the Bureau of Labor Statistics (BLS). Consequently, the COLA increase of 5.9% for 2022 may be insufficient for beneficiaries who currently face a much higher rate of inflation.
Read on to learn more about Social Security’s 2023 COLA predictions. And if you’re looking for ways to cut expenses this year, you may want to consider paying off higher-interest debt with a fixed-rate personal loan. You can visit Credible for compare free debt consolidation offers without affecting your credit score.
What you should know about Social Security’s COLA forecast for 2023
The Social Security Administration (SSA) calculates the cost of living adjustment based on the CPI-W inflation data. Although the current CPI-W points to an annual inflation rate of 8.6%, Johnson said “it is too early to make a call on the COLA, especially at a time when we have received one unexpected piece of news after another.”
While a potential profit increase of 7.6% may seem significant, it is not unusual. The highest COLA increase ever recorded was 14.3% in 1980, SSA reports. And this was the result of the IPC-W rising 12.4% during 1979, according to the BLS.
In 2022, the Social Security adjustment was 5.9%, the biggest increase in 40 yearsbut well below current 7.9% annual inflation rate. And with sharp increases in gasoline prices and energy costs fueled by the Russian invasion of Ukraine, inflation is likely to rise and continue to outpace the 2022 COLA even further.
If you are having difficulty balancing your household budget in the midst of high inflation, you may reduce your monthly debt payments with a personal loan. Can Learn more about debt consolidation. visiting Credible.
TSCL: Inflation may ‘continue to erode Social Security’s purchasing power’
Cost-of-living adjustments are designed to protect the value of Social Security payments over time. However, Social Security benefits have lost almost a third (32%) of their purchasing power since 2000, according to a recent TSCL report.
“Even worse, it appears that inflation is not done with us yet, and the purchasing power of Social Security benefits may continue to erode in 2022,” Johnson said in a statement.
Johnson argued that the consumer price data used to calculate COLAs does not adequately represent some rising costs unique to Social Security beneficiaries, such as health care. Although monthly benefits have increased 55% in the last 21 years, health care costs it rose 145% over the same period, he said.
The average monthly benefit increased by just $92 as a result of the 2022 COLA, TSCL reported. The group said it recently received hundreds of emails from “many retired and disabled mailers describing the dire situations they face as rapidly rising inflation makes it impossible to pay bills.”
If inflation has made it difficult for you to keep up with mounting debt payments, you might consider meeting with a nonprofit credit counseling agency. Credit counselors can help you manage your debts and negotiate with creditors on your behalf.
Alternatively, you can consider consolidating your debt into a fixed-rate personal loan. Applicants with good credit may be able to save thousands on interest charges through credit card consolidation. You can look up current interest rates in the table below and at Credible’s online financial marketplace.
Do you have a finance-related question, but don’t know who to ask? Email the credible money expert at email@example.com and your question could be answered by Credible in our Money Expert column.