Social Security COLA 2023 concessions are rising by 8.7%

Welcome the boost, but be alert of your spending in this high-inflation circumstances

According to the Social Security Administration, the cost-of-living adjustment for 2023 will be 8.7%.

Specialists said that Social Security’s COLA hike could partially be attributed to increased inflation. And while it’s a welcome result of inflation — which has caused numerous Americans to worry over their monthly invoices —it may still not be sufficient to fight everyday costs.

Every year since 1975, the SSA has instituted a cost-of-living adjustment (COLA) after analyzing inflation rates to see how much to raise beneficiary payments to enable recipients to keep up with the price of goods.

“The COLA is one of the most useful features of Social Security, allowing seniors and people with disabilities to keep up with costs and providing they don’t slip into poverty as they age,” said Kathleen Romig, a senior policy critic at the Center for Budget and Policy Priorities. “The COLA is easy to take for given in years with lower inflation, but this year shows how important it is.”

According to a Transamerica Center for Retirement Studies report, almost seven-in-10 retirees rely on Social Security as their primary retirement income source.

But the amount of Social Security is not tied to the prices of goods and services typically used by older Americans. The COLA is instead linked to the consumer price index for urban workers, or CPI-W, which more heavily weighs costs for transportation, food, apparel, and other expenses you’d expect an urban non-retiree to spend on. In addition, there’s another consumer price index that targets elderly spending specifically, called the CPI-E, which focuses more on healthcare, housing, and other goods and services a retiree uses.

How this boost corresponds to recent COLA upsurges

As of September 2022, the average recipient of Social Security got in a check for $1,547.87 each month. But the average retired employee accomplished slightly more acceptable, drawing in $1,673.88 each month.

How much would the latest average earnings be? The rate of gain is based on the Consumer Price Index for urban wage earners and clerical workers, or CPI-W. With the announced increases for 2023, those formations would grow to around $1,683 and $1,820, respectively.

Here are the reported boosts over the previous decade

Source: Social Security Administration

This year’s increase vastly outpaces any in the recent past, and you’d have to go back to 1981 before you found a more significant boost. Social Security does not announce decreases in benefits. Instead, it does not report an increase in 2010 and 2015.

“Real inflation is different for every consumer, in particular retirees. However, energy prices have to lead the way in the recent inflation jumps, as well as price leaps in food and other things due to supply chain requirements due to COVID shutdowns, and we anticipate those jumps may not survive,” said Rob Williams, Managing Director of Financial Planning at Charles Schwab.

“Inflation is clearly and understandably a worry in the short term, and the Social Security COLA lags a year. But the COLA increase is a valuable feature that supports retirees from truly being connected to a ‘fixed income’ when handling expenditures in retirement,” Williams said.

Conclusion: Social Security COLA 2023

While this year’s COLA is a nice boost in pay, Social Security recipients have had to live through rocketing costs to get it. So those on the brink of claiming their benefit may want to consider the best time to file for Social Security carefully. You could earn tens of thousands more by declaring at the right time. Here’s how to estimate your benefits in retirement.