Retirees might not see a double-digit increase in their Social Security benefits next year, as inflation cools, but they could still see a significant bump, according to several new estimates.
Based on new inflation data, the cost-of-living adjustment for Social Security benefits, or COLA, could be an increase of 9.6% next year, boosting the average retiree benefit of $1,656 by $159 per month, according to estimates from the Senior Citizens League.
That would still be the largest increase since 1981.
For the roughly 70 million retired senior citizens and disabled workers who have grappled with soaring prices from the grocery store to the gas pump eroding the buying power of their Social Security benefits, that possible hike in their monthly checks would be splendid news.
“That would still be the highest cost of living adjustment ever received by today’s retired and disabled Social Security recipients,” Mary Johnson, a Social Security policy analyst for The Senior Citizens League, told Yahoo Money. “And boy do we need it. Inflation has consistently outpaced the 5.9% COLA that we received in 2022 by about 58% on average.”
A retiree with an average benefit of $1,656.30 who received a COLA of $92.30 in January in reality needs about $53.40 more per month just to maintain the purchasing power this individual had in January, Johnson said.
This week, the measure Social Security Administration (SSA) uses to calculate COLA — the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) — increased 9.1% year over year in July, down from the 9.8% increase it clocked last month. That CPI-W number is different from the headline Consumer Price Index (CPI) figure that climbed 8.5% year over year in July, down from 9.1% last month as fuel prices, airfares, and used cars dropped in price.
The SSA uses the average CPI-W consumer price index for July, August, and September of 2022 over the previous year’s third quarter.
So, if inflation runs lower than the recent average in the next two months — as many expect — the COLA could be 9.3%, according to the Senior Citizens League estimates. The Federal Reserve Bank of New York’s most recent Survey of Consumer Expectations found “substantial declines in short-, medium- and longer-term inflation expectations.”
Other experts concurred.
“The COLA will likely land between 9% and 10% this year,” Marc Goldwein, senior vice president and senior policy director at the nonprofit Committee for a Responsible Federal Budget, told Yahoo Money.
“I think we’re likely to have at least a 9% COLA increase for next year,” Laurence Kotlikoff, Social Security expert and Boston University economics professor, told Yahoo Money. “We still have several months to go, and the inflation is still coming in pretty high.”
The Social Security Administration is expected to announce the COLA on Oct. 13, after the release of September’s CPI data. The income boost, however, would not kick in until checks land in January.
“There is that three-month lag, but they will likely get some relief and be compensated for the higher prices they’ve been dealing with this year,” Kotlikoff said. “It’s just the timing. If prices, for example, were to drop at the end of the year in October, November, December, and we had deflation, people would be in some ways overcompensated, so it can go both ways.”
The bump-up in monthly checks could have a troubling impact on low-income seniors. Higher income can mean cuts in income-related benefits for low-income seniors, according to Johnson.
A May through July survey of more than 2,557 participants conducted by the Senior Citizens League found that 39% of participants who receive low-income benefits reported their low-income assistance was reduced due to this year’s 5.9% COLA, while 15% reported they lost access to at least one assistance program.
Kerry is a Senior Columnist and Senior Reporter at Yahoo Money. Follow her on Twitter @kerryhannon