Social Security recipients will know the amount of their higher payments for 2023 after an announcement is made Thursday, Oct. 13.
Estimates suggest the Social Security Administration will put the increase of the new cost-of-living adjustment (COLA) at nearly 9%. That would be the largest hike since the most recent inflationary period more severe than the current one resulted in an increase of 11.2% in 1981.
At a 9% increase, a near-average Social Security check for $1,600 would be adjusted to $1,744.
In addition to the short-term benefit, the increase is important for the long term as well. That’s because any future changes to COLA will be based on the new, higher number. So it’s a relatively permanent boost.
But it’s really the only way to help beneficiaries try to keep up with rising costs. As interest rates rise to fight inflation, other costs involving loans and credit cards will also continue to expand.
It’s not only senior citizens whose benefits will improve with these changes. Many people with disabilities, and an estimated 4 million children whose parents are retired, deceased or disabled will receive the increased payments as well.
Controversy Over Calculating COLAs
The Senior Citizens League (TSCL) believes that COLA is being calculated incorrectly and to the disadvantage of seniors.
“According to TSCL’s research, Social Security benefits have lost over thirty percent of their purchasing power since 2000 due in large part to inadequate COLAs and rising health care costs,” the organization writes. “To address this growing issue, TSCL urges Congress to adopt legislation that would base the COLA on an inflation index specifically for seniors, like the Consumer Price Index for the Elderly (CPI-E).”
The COLA calculation for Social Security payments is currently based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
“The index that is currently used to measure inflation,” TSCL continues, “underestimates the inflation that Social Security beneficiaries experience since it does not give enough weight to expenses like health care or housing costs.”
The senior advocacy group says it supports legislation such as the CPI-E Act, the Guaranteed 3% COLA Act, and the Seniors’ Security Act. It also encourages efforts to provide beneficiaries an increase in benefits to help compensate for years of what it calls low COLAs.
Some CPI Variant Specifics
The Bureau of Labor Statistics describes the CPI-W as a “specialized index and seeks to track retail prices as they affect urban hourly wage earners and clerical workers. It encompasses about 32 percent of the United States’ population.”
The CPI-W is a subset of the more general CPI-U. The Consumer Price Index for All Urban Consumers (CPI-U) is a measure of change in prices paid by urban consumers for a wide range of consumer goods and services. It applies to about 87% of the population.
The Consumer Price Index for the Elderly (CPI-E) uses the same data as the CPI-W, but it uses expenses for households including people 62 years of age or older. So it more specifically is aimed at the demographic mostly affected by Social Security benefit adjustments.
The CPI-E covers a population about one-third the size of the CPI-U and is referred to often as experimental.